PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for Prime Obligations
Fund (the "Fund") which covers the twelve-month period ended July 31, 1994. The
report begins with the Fund's Investment Review, followed by Financial
Statements containing the Fund's Portfolio of Investments.
The Fund continues to put your money to work pursuing current income consistent
with stability of principal,* while giving you daily access to your money. At
the end of the report period, the Fund's assets were invested in a diversified
portfolio of investment grade money market securities.
During the twelve-month reporting period ended July 31, 1994, dividends paid to
shareholders totaled $41.2 million. At the end of the period, net assets reached
$1.3 billion.
Thank you for putting your cash to work through Prime Obligations Fund. We
welcome your questions and comments.
Sincerely,
J. Christopher Donahue
President
September 15, 1994
* ALTHOUGH NO MONEY MARKET MUTUAL FUND CAN GUARANTEE A STABLE $1.00 SHARE VALUE,
THE FUND HAS DONE SO SINCE ITS INCEPTION. AN INVESTMENT IN THE FUND IS NEITHER
INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
1
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
Prime Obligations Fund ("the Fund") invests exclusively in money market
instruments maturing in thirteen months or less. The average maturity of these
securities, computed on a dollar-weighted basis, is restricted to 90 days or
less. Portfolio securities must be rated in the highest short-term rating
category by one or more of the nationally recognized statistical rating
organizations or be of comparable quality to securities having such ratings.
Typical security types include, but are not limited to: commercial paper,
certificates of deposit, time deposits, variable rate instruments and repurchase
agreements.
The most recent economic information would suggest that the economy has slowed
from its 1993 year-end pace. Despite this slowdown in second quarter Gross
Domestic Product (GDP) and the downward revisions for the first quarter of 1994
and the fourth quarter of 1993, growth in the economy remains above the Federal
Reserve Board's (the "Fed's") 2.5 - 3.0% target range. Jobs are being added in
this recovery, albeit at a slower rate than is considered normal for this part
of the cycle. Housing has weakened, but durable goods have begun to rebound, and
auto sales remain strong.
The target average maturity range for the Fund has been reduced from its maximum
of 50-60 days in November, 1993, to its current 30-40 day range. This reflects
our continuing bias that the money market yield curve is fairly steep, and value
can be obtained through both structure as well as stepping slightly out the
curve. In structuring the Fund, there is continued emphasis placed on
positioning 25-30% of the Fund's assets in variable rate demand notes and
accomplishing a modest barbell structure.
Defensive positioning has proven helpful since October, 1993. The Fed has raised
short-term rates five times since February 4, 1994. The Federal Funds rate
target has increased from 3.0% to 4.75% and the discount rate has increased from
3.0% to 4.0%. Despite the fact that the Consumer Price Index ("CPI") and
Producers Price Index ("PPI") indicate moderate inflationary levels, the Fed has
begun to fight 'inflation expectations'. Given the continued path of recovery,
the Fed has now declared a neutral stance for the second time since May 1994.
Despite this neutral stance, we would expect the direction of short-term
interest rates to continue upward.
During the twelve month period ended July 31, 1994, the net assets of the Fund
increased from $1.1 billion to $1.3 billion while the Institutional Shares 7-day
net yield increased from 3.09% to 4.30% and the Institutional Service Shares was
4.08%.* The effective average maturity of the Fund on July 31, 1994 was 42 days.
* PERFORMANCE QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE
RESULTS.
2
PRIME OBLIGATIONS FUND
PORTFOLIO OF INVESTMENTS
JULY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- --------------------------------------------------------------- -------------
<C> <S> <C>
CERTIFICATES OF DEPOSIT--2.0%
- ------------------------------------------------------------------------------
BANKING--2.0%
---------------------------------------------------------------
$ 20,000,000 Canadian Imperial Bank of Commerce, Toronto,
3.52%, 8/5/94 $ 20,000,000
---------------------------------------------------------------
5,000,000 Rabobank Nederland, Utrecht Bank,
3.53%, 8/16/94 4,999,960
--------------------------------------------------------------- -------------
TOTAL CERTIFICATES OF DEPOSIT 24,999,960
--------------------------------------------------------------- -------------
*COMMERCIAL PAPER--53.7%
- ------------------------------------------------------------------------------
BANKING--11.5%
---------------------------------------------------------------
25,000,000 ABN AMRO N.A., Finance, Inc., (Guaranteed by ABN AMRO Bank
N.V., Amsterdam), 4.55%, 9/21/94 24,840,625
---------------------------------------------------------------
5,000,000 Bank of Nova Scotia, Toronto, 5.20%, 1/9/95 4,886,629
---------------------------------------------------------------
59,000,000 Canadian Imperial Holdings, Inc., (Guaranteed by Canadian
Imperial Bank of Commerce, Toronto), 3.34%-4.70%,
8/3/94-10/24/94 58,603,003
---------------------------------------------------------------
24,700,000 City of Cleveland, (Union Bank of Switzerland, Zurich LOC),
4.56%, 9/7/94 24,700,000
---------------------------------------------------------------
4,000,000 Comdisco, Inc., (Union Bank of Switzerland, Zurich LOC), 4.09%,
9/22/94 3,976,831
---------------------------------------------------------------
2,000,000 PEMEX Capital, Inc., (Swiss Bank Corp., New York, NY LOC),
3.43%, 8/2/94 1,999,812
---------------------------------------------------------------
24,871,000 Queensland Alumina, Ltd., (Credit Suisse, Zurich LOC),
4.34%-4.85%, 8/2/94-10/14/94 24,771,713
---------------------------------------------------------------
2,000,000 Toronto Dominion Holdings (USA), Inc., 5.11%, 11/9/94 1,972,278
--------------------------------------------------------------- -------------
Total 145,750,891
--------------------------------------------------------------- -------------
FINANCE--AUTOMOTIVE--5.3%
---------------------------------------------------------------
46,700,000 Ford Credit Receivables Funding Inc., 4.28%-4.54%,
8/26/94-10/7/94 46,471,317
---------------------------------------------------------------
20,000,000 New Center Asset Trust, A1+/P1 Series, 4.73%, 8/15/94 19,963,600
--------------------------------------------------------------- -------------
Total 66,434,917
--------------------------------------------------------------- -------------
</TABLE>
3
PRIME OBLIGATIONS FUND
- ---------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- --------------------------------------------------------------- -------------
<C> <S> <C>
*COMMERCIAL PAPER--CONTINUED
- ------------------------------------------------------------------------------
FINANCE--COMMERCIAL--22.8%
---------------------------------------------------------------
$ 73,500,000 Asset Securitization Cooperative Corp., 4.00%-5.13%,
8/4/94-1/19/95 $ 72,823,213
---------------------------------------------------------------
13,000,000 Beta Finance, Inc., 4.75%, 10/25/94 12,855,736
---------------------------------------------------------------
10,000,000 CIESCO, Inc., 4.06%, 9/20/94 9,944,722
---------------------------------------------------------------
89,000,000 CIT Group Holdings Inc., 3.43%-4.91%, 9/7/94-12/19/94 88,193,429
---------------------------------------------------------------
9,000,000 Corporate Asset Funding Co., Inc. (CAFCO), 4.18%-5.183%,
9/27/94-1/5/95 8,863,916
---------------------------------------------------------------
75,500,000 General Electric Capital Corp., 3.45%-5.33%, 8/9/94-1/18/95 74,528,902
---------------------------------------------------------------
20,000,000 ITT Financial Corp., 4.25%, 8/1/94 20,000,000
--------------------------------------------------------------- -------------
Total 287,209,918
--------------------------------------------------------------- -------------
FINANCE--RETAIL--1.7%
---------------------------------------------------------------
22,000,000 Associates Corp. of North America, 4.47%, 9/13/94 21,883,852
--------------------------------------------------------------- -------------
FOOD & BEVERAGE--1.6%
---------------------------------------------------------------
20,000,000 Anheuser-Busch Companies, Inc., 3.51%-3.54%, 9/7/94-9/9/94 19,927,767
--------------------------------------------------------------- -------------
INSURANCE--8.8%
---------------------------------------------------------------
20,000,000 American General Corp., 4.22%, 8/1/94 20,000,000
---------------------------------------------------------------
22,591,000 Prospect Street Senior Loan Portfolio, L.P., (Guaranteed by
Financial Security Assurance, Inc.), 3.34%-4.97%,
8/1/94-11/28/94 22,448,839
---------------------------------------------------------------
69,000,000 Prudential Funding Corp., 4.13%-5.01%, 10/3/94-1/20/95 68,073,991
--------------------------------------------------------------- -------------
Total 110,522,830
--------------------------------------------------------------- -------------
PHARMACEUTICALS--0.9%
---------------------------------------------------------------
11,000,000 Schering Corp., 4.29%, 10/18/94 10,899,900
--------------------------------------------------------------- -------------
UTILITIES--1.1%
---------------------------------------------------------------
14,000,000 Ameritech Corp., 4.81%, 12/12/94 13,756,906
--------------------------------------------------------------- -------------
TOTAL COMMERCIAL PAPER 676,386,981
--------------------------------------------------------------- -------------
**VARIABLE RATE INSTRUMENTS--28.4%
- ------------------------------------------------------------------------------
BANKING--17.3%
---------------------------------------------------------------
4,100,000 500 South Front St. L.P., Series A, (Huntington National Bank,
Columbus, OH LOC), 4.80%, 8/4/94 4,100,000
---------------------------------------------------------------
</TABLE>
4
PRIME OBLIGATIONS FUND
- ---------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- --------------------------------------------------------------- -------------
<C> <S> <C>
**VARIABLE RATE INSTRUMENTS--CONTINUED
- ------------------------------------------------------------------------------
BANKING--CONTINUED
---------------------------------------------------------------
$ 7,000,000 500 South Front St. L.P., Series B, (Huntington National Bank,
Columbus, OH LOC), 4.80%, 8/4/94 $ 7,000,000
---------------------------------------------------------------
13,156,000 Adesa Funding Corp., (Bank One, Indianapolis, IN LOC), 4.72%,
8/4/94 13,156,000
---------------------------------------------------------------
8,750,000 Alexandria Executive Club L.P., (Huntington National Bank,
Columbus, OH LOC), 4.80%, 8/4/94 8,750,000
---------------------------------------------------------------
16,900,000 Beverly California Corp., (PNC Bank, N.A. LOC), 4.72%, 8/1/94 16,900,000
---------------------------------------------------------------
4,085,000 Eastwinds Investment, Ltd., (Huntington National Bank,
Columbus, OH LOC), 4.80%, 8/4/94 4,085,000
---------------------------------------------------------------
2,485,000 Grote Family L.P., (Huntington National Bank, Columbus, OH
LOC), 4.80%, 8/4/94 2,485,000
---------------------------------------------------------------
24,000,000 Holy Cross Health System Corp., (Swiss Bank Corp., New York, NY
LOC), 4.95%, 8/3/94 24,000,000
---------------------------------------------------------------
5,000,000 Hunt Club Apartments, Inc., (Huntington National Bank,
Columbus, OH LOC), 4.80%, 8/4/94 5,000,000
---------------------------------------------------------------
4,800,000 Kokosing Construction Co., Inc., (National City Bank,
Cleveland, OH LOC), 4.55%, 8/4/94 4,800,000
---------------------------------------------------------------
8,600,000 Mississippi Business Finance Corp., (Comerica Bank LOC), 4.80%,
8/4/94 8,600,000
---------------------------------------------------------------
5,000,000 Olen Corp., (National City Bank, Cleveland, OH LOC), 4.55%,
8/4/94 5,000,000
---------------------------------------------------------------
29,000,000 PHH/CFC Leasing, Inc., (Societe Generale, Paris LOC), 4.78%,
8/3/94 29,000,000
---------------------------------------------------------------
2,800,000 Ramsey Real Estate Enterprises, (National City Bank, KY LOC),
4.55%, 8/4/94 2,800,000
---------------------------------------------------------------
7,900,000 Roby Company, Ltd. Partnership, (Huntington National Bank,
Columbus, OH LOC), 4.80%, 8/4/94 7,900,000
---------------------------------------------------------------
13,750,000 Rooker, J.W., (Wachovia Bank of Atlanta, GA, N.A. LOC), 4.78%,
8/3/94 13,750,000
---------------------------------------------------------------
7,360,000 Shenandoah Partners L.P., (Huntington National Bank, Columbus,
OH LOC), 4.80%, 8/4/94 7,360,000
---------------------------------------------------------------
</TABLE>
5
PRIME OBLIGATIONS FUND
- ---------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- --------------------------------------------------------------- -------------
<C> <S> <C>
**VARIABLE RATE INSTRUMENTS--CONTINUED
- ------------------------------------------------------------------------------
BANKING--CONTINUED
---------------------------------------------------------------
$ 35,000,000 SMM Trust, Series 1993-B, (Guaranteed by Morgan Guaranty),
4.86%, 8/12/94 $ 35,000,000
---------------------------------------------------------------
15,981,000 Vista Funding Corp., (Bank One, Akron, OH N.A. LOC), 4.72%,
8/4/94 15,981,000
---------------------------------------------------------------
2,500,000 YMCA of Central, OH, (Huntington National Bank, Columbus, OH
LOC), 4.80%, 8/4/94 2,500,000
--------------------------------------------------------------- -------------
Total 218,167,000
--------------------------------------------------------------- -------------
ELECTRICAL EQUIPMENT--3.4%
---------------------------------------------------------------
11,111,837 GS Funding Corp., (Guaranteed by General Electric Co.), 4.72%,
8/1/94 11,111,837
---------------------------------------------------------------
6,000,000 Lauda Air, (Guaranteed by General Electric Co.), 4.74%, 8/1/94 6,000,000
---------------------------------------------------------------
25,909,392 Northwest Airlines, Inc., (Guaranteed by General Electric Co.),
4.74%, 8/1/94 25,909,392
--------------------------------------------------------------- -------------
Total 43,021,229
--------------------------------------------------------------- -------------
FINANCE--AUTOMOTIVE--5.7%
---------------------------------------------------------------
32,000,000 Carco Auto Loan Master Trust, Series 1993-2, 4.65%, 8/15/94 32,000,000
---------------------------------------------------------------
40,000,000 Money Market Auto Loan Trust, 4.73%, 8/15/94 40,000,000
--------------------------------------------------------------- -------------
Total 72,000,000
--------------------------------------------------------------- -------------
INSURANCE--2.0%
---------------------------------------------------------------
25,000,000(a) Peoples Security Life Insurance, 4.58%, 8/1/94 25,000,000
--------------------------------------------------------------- -------------
TOTAL VARIABLE RATE INSTRUMENTS 358,188,229
--------------------------------------------------------------- -------------
SHORT-TERM NOTES--2.1%
- ------------------------------------------------------------------------------
BANKING--1.1%
---------------------------------------------------------------
8,000,000(a) A.P. Investment Co., 3.85%, 9/7/94 8,000,000
---------------------------------------------------------------
6,000,000 Bayerische Landesbank Girozentrale, 3.625%, 12/9/94 6,000,770
--------------------------------------------------------------- -------------
Total 14,000,770
--------------------------------------------------------------- -------------
</TABLE>
6
PRIME OBLIGATIONS FUND
- ---------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- --------------------------------------------------------------- -------------
<C> <S> <C>
SHORT-TERM NOTES--CONTINUED
- ------------------------------------------------------------------------------
FINANCE--RETAIL--0.6%
---------------------------------------------------------------
$ 5,000,000 American General Finance Corp., 3.53%, 9/15/94 $ 5,035,655
---------------------------------------------------------------
2,800,000 Associates Corp. of North America, 3.63%-3.65%,
11/15/94-12/1/94 2,831,615
--------------------------------------------------------------- -------------
Total 7,867,270
--------------------------------------------------------------- -------------
GOVERNMENT AGENCY--0.4%
---------------------------------------------------------------
4,000,000 Tennessee Valley Authority, 3.82%, 10/1/94 4,208,934
--------------------------------------------------------------- -------------
TOTAL SHORT-TERM NOTES 26,076,974
--------------------------------------------------------------- -------------
***REPURCHASE AGREEMENTS--14.6%
- ------------------------------------------------------------------------------
40,000,000 Bear, Stearns and Co., Inc., 4.22%, dated 7/29/94, due 8/1/94 40,000,000
---------------------------------------------------------------
60,000,000 Daiwa Securities America, Inc. 4.20%, dated 7/29/94, due 8/1/94 60,000,000
---------------------------------------------------------------
60,000,000 Donaldson, Lufkin and Jenrette Securities Corp., 4.22%, dated
7/29/94, due 8/1/94 60,000,000
---------------------------------------------------------------
24,350,000 Kidder, Peabody & Co., Inc., 4.22%, dated 7/29/94, due 8/1/94 24,350,000
--------------------------------------------------------------- -------------
TOTAL REPURCHASE AGREEMENTS (NOTE 2B) 184,350,000
--------------------------------------------------------------- -------------
TOTAL INVESTMENTS, AT AMORTIZED COST $1,270,002,144+
--------------------------------------------------------------- -------------
<FN>
* Each issue shows the rate of discount at the time of purchase for discount
issues, or the coupon for interest bearing issues.
** Current rate and next reset date shown.
*** Repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
The investments in repurchase agreements are through participation in
joint accounts with other Federated Funds.
(a) Restricted Securities (Note 5).
+ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($1,260,366,471) at July 31, 1994.
The following abbreviation is used in this portfolio:
LOC--Letter of Credit
</TABLE>
(See Notes which are an integral part of the Finanical Statements)
7
PRIME OBLIGATIONS FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------
Investments in other securities (Note 2A) $ 1,085,652,144
- ----------------------------------------------------------------------
Investments in repurchase agreements (Note 2B) 184,350,000
- ---------------------------------------------------------------------- ---------------
Total investments, at amortized cost and value $ 1,270,002,144
- ----------------------------------------------------------------------------------------
Interest receivable 3,014,604
- ----------------------------------------------------------------------------------------
Deferred expenses (Note 2F) 790
- ---------------------------------------------------------------------------------------- ---------------
Total assets 1,273,017,538
- ----------------------------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------------------------
Payable to Bank 8,404,957
- ----------------------------------------------------------------------
Dividends payable 3,942,438
- ----------------------------------------------------------------------
Payable for Fund shares redeemed 3,693
- ----------------------------------------------------------------------
Accrued expenses 299,979
- ---------------------------------------------------------------------- ---------------
Total liabilities 12,651,067
- ---------------------------------------------------------------------------------------- ---------------
NET ASSETS for 1,260,366,471 shares of beneficial interest outstanding $ 1,260,366,471
- ---------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
- ----------------------------------------------------------------------------------------
Institutional Shares ($1,250,979,261 DIVIDED BY 1,250,979,261 shares of beneficial
interest outstanding) $ 1.00
- ---------------------------------------------------------------------------------------- ---------------
Institutional Service Shares ($9,387,210 DIVIDED BY 9,387,210 shares of beneficial
interest outstanding) $ 1.00
- ---------------------------------------------------------------------------------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
8
PRIME OBLIGATIONS FUND
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------
Interest income (Note 2C) $43,573,931
- -------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------
Investment advisory fee* $2,368,688
- ------------------------------------------------------------
Trustees' fees 4,244
- ------------------------------------------------------------
Administrative personnel and services fees* 762,145
- ------------------------------------------------------------
Custodian fees 134,035
- ------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses* 27,001
- ------------------------------------------------------------
Fund share registration costs 247,815
- ------------------------------------------------------------
Auditing fees 13,145
- ------------------------------------------------------------
Legal fees 11,663
- ------------------------------------------------------------
Printing and postage 11,498
- ------------------------------------------------------------
Portfolio accounting fees* 109,556
- ------------------------------------------------------------
Insurance premiums 56,155
- ------------------------------------------------------------
Taxes 21,030
- ------------------------------------------------------------
Shareholder services fee--Institutional Shares* 205,170
- ------------------------------------------------------------
Shareholder services fee--Institutional Service Shares* 652
- ------------------------------------------------------------
Miscellaneous 12,464
- ------------------------------------------------------------ ----------
Total expenses 3,985,261
- ------------------------------------------------------------
Deduct--Waiver of investment advisory fee* 1,615,921
- ------------------------------------------------------------ ----------
Net expenses 2,369,340
- ------------------------------------------------------------------------- -----------
Net investment income $41,204,591
- ------------------------------------------------------------------------- -----------
<FN>
* (See Note 4)
</TABLE>
(See Notes which are an integral part of the Financial Statements)
9
PRIME OBLIGATIONS FUND
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
----------------------------------
1994 1993
- ----------------------------------------------------------------------- --------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------
Net investment income $ 41,204,591 $ 32,550,206
- ----------------------------------------------------------------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- -----------------------------------------------------------------------
Dividends to shareholders from net investment income:
- -----------------------------------------------------------------------
Institutional Shares (41,183,125) (32,550,206)
- -----------------------------------------------------------------------
Institutional Service Shares (21,466) --
- ----------------------------------------------------------------------- --------------- ---------------
Change in net assets from distributions to shareholders (41,204,591) (32,550,206)
- ----------------------------------------------------------------------- --------------- ---------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- -----------------------------------------------------------------------
Proceeds from sale of shares 8,598,402,134 5,287,583,256
- -----------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 6,605,494 1,429,731
- -----------------------------------------------------------------------
Cost of shares redeemed (8,442,800,343) (5,108,271,778)
- ----------------------------------------------------------------------- --------------- ---------------
Change in net assets from Fund share transactions 162,207,285 180,741,209
- ----------------------------------------------------------------------- --------------- ---------------
Change in net assets 162,207,285 180,741,209
- -----------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------
Beginning of period 1,098,159,186 917,417,977
- ----------------------------------------------------------------------- --------------- ---------------
End of period $ 1,260,366,471 $ 1,098,159,186
- ----------------------------------------------------------------------- --------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
10
PRIME OBLIGATIONS FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
----------------------------------------------------------
1994 1993 1992 1991 1990*
--------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------
Net investment income 0.03 0.03 0.05 0.07 0.03
- ------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------
Dividends to shareholders from net investment income (0.03) (0.03) (0.05) (0.07) (0.03)
- ------------------------------------------------------------ --------- --------- --------- --------- --------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------ --------- --------- --------- --------- --------------
TOTAL RETURN** 3.47% 3.25% 4.74% 7.30% 2.89%
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------
Expenses 0.20% 0.20% 0.20% 0.20% 0.20%(b)
- ------------------------------------------------------------
Net investment income 3.47% 3.20% 4.53% 6.54% 8.21%(b)
- ------------------------------------------------------------
Expense waiver/reimbursement (a) 0.14% 0.09% 0.10% 0.24% 0.68%(b)
- ------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------
Net assets, end of period
(000 omitted) $1,250,979 $1,098,159 $917,418 $473,593 $34,777
- ------------------------------------------------------------
<FN>
* Reflects operations for the period from March 26, 1990 (date of initial
public investment) to July 31, 1990.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(b) Computed on an annualized basis.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
11
PRIME OBLIGATIONS FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- ---------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
JULY 31, 1994*
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.003
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.003)
- ---------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $1.00
- ---------------------------------------------------------------------- -------
TOTAL RETURN** 0.30%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 0.34% (b)
- ----------------------------------------------------------------------
Net investment income 4.68% (b)
- ----------------------------------------------------------------------
Expense waiver/ reimbursement (a) 0.14% (b)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $9,387
- ----------------------------------------------------------------------
<FN>
* Reflects operations for the period from July 5, 1994 (date of initial public
offering) to July 31, 1994.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(b) Computed on an annualized basis
</TABLE>
(See Notes which are an integral part of the Financial Statements)
12
PRIME OBLIGATIONS FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Money Market Obligations Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end, management
investment company. The Trust consists of five diversified portfolios. The
financial statements included herein are only those of Prime Obligations Fund
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held. Effective July 5,
1994, (the effective date for Institutional Service Shares) the Fund provides
two classes of shares ("Institutional Shares" and "Institutional Service
Shares").
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve
Book Entry System, or to have segregated within the custodian bank's vault,
all securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Fund to
monitor, on a daily basis, the market value of each repurchase agreement's
underlying collateral to ensure that the value of collateral at least equals
the principal amount of the repurchase agreement, including accrued
interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as brokers/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees (the "Trustees"). Risks may arise from
the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
13
PRIME OBLIGATIONS FUND
- ---------------------------------------------------------
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its tax-exempt income.
Accordingly, no provisions for federal tax are necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At July 31, 1994, capital paid-in aggregated $1,260,366,471.
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
---------------------------------
INSTITUTIONAL SHARES 1994 1993
- -------------------------------------------------- --------------- ---------------
<S> <C> <C>
Shares sold 8,582,784,664 5,287,583,256
- --------------------------------------------------
Shares issued to shareholders in payment of
dividends declared 6,585,754 1,429,731
- --------------------------------------------------
Shares redeemed (8,436,550,343) (5,108,271,778)
- -------------------------------------------------- --------------- ---------------
Net change resulting from Institutional Shares
transactions 152,820,075 180,741,209
- -------------------------------------------------- --------------- ---------------
<CAPTION>
YEAR ENDED
JULY 31,
---------------
INSTITUTIONAL SERVICE SHARES 1994*
- -------------------------------------------------- ---------------
<S> <C> <C>
Shares sold 15,617,470
- --------------------------------------------------
Shares issued to shareholders in payment of
dividends declared 19,740
- --------------------------------------------------
Shares redeemed (6,250,000)
- -------------------------------------------------- ---------------
Net change resulting from Institutional Service
Shares transactions 9,387,210
- -------------------------------------------------- ---------------
Net change resulting from Fund share
transactions 162,207,285
- -------------------------------------------------- ---------------
<FN>
* For the period from July 5, 1994 (date of initial public offering) to July 31,
1994.
</TABLE>
14
PRIME OBLIGATIONS FUND
- ---------------------------------------------------------
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 0.20 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver, at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
administrative personnel and services. Prior to March 1, 1994, these services
were provided at approximate cost. Effective March 1, 1994, the FAS fee is based
on the level of average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors for the period. The administrative fee
received during the period of the Administrative Services Agreement shall be at
least $125,000 per portfolio and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25 of
1% of average net assets of the Fund for the period. This fee is to obtain
certain personal services for shareholders and to maintain the shareholder
accounts.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND ACCOUNTING FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The FServ fee is based on the size, type, and number of accounts and
transactions made by shareholders.
FServ also maintains the Fund's accounting records. The fee is based on the
level of the Fund's average net assets for the period plus, out-of-pocket
expenses.
Certain of the Officers and Trustees of the Fund are Officers and Directors or
Trustees of the above companies.
(5) RESTRICTED SECURITIES
Restricted securities are securities that may only be resold upon registration
under Federal securities laws or in transactions exempt from such registration.
Many restricted securities may be resold in the secondary market in transactions
exempt from registration. In some cases, the restricted securities may be resold
without registration upon exercise of a demand feature. Such restricted
securities may be determined to be liquid under criteria established by the
Board of Trustees. The Fund will not incur any registration costs upon such
resales. The Fund's restricted securities are valued at amortized cost in
accordance with Rule 2a-7 under the Investment Company Act of 1940. Additional
information on each restricted security held at July 31, 1994 is as follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
- ------------------------------------------------------------------ ----------- -------------
<S> <C> <C>
A.P. Investment Co. 9/16/93 $ 8,000,000
Peoples Security Life Insurance 7/11/94 $ 25,000,000
</TABLE>
15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
MONEY MARKET OBLIGATIONS TRUST
(Prime Obligations Fund):
We have audited the accompanying statement of assets and liabilities of Prime
Obligations Fund (an investment portfolio of Money Market Obligations Trust, a
Massachusetts business trust), including the schedule of portfolio investments,
as of July 31, 1994, the related statement of operations for the year then
ended, and the statement of changes in net assets for each of the two years in
the period then ended, and the financial highlights for the periods presented.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1994, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Prime
Obligations Fund (an investment portfolio of Money Market Obligations Trust) as
of July 31, 1994, and the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the financial highlights for the periods presented, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
September 15, 1994
16
<TABLE>
<CAPTION>
TRUSTEES OFFICERS
- ---------------------------------------------------------
<S> <C>
John F. Donahue John F. Donahue
John T. Conroy, Jr. CHAIRMAN
William J. Copeland J. Christopher Donahue
J. Christopher Donahue PRESIDENT
James E. Dowd Richard B. Fisher
Lawrence D. Ellis, M.D. VICE PRESIDENT
Edward L. Flaherty, Jr. Edward C. Gonzales
Peter E. Madden VICE PRESIDENT AND TREASURER
Gregor F. Meyer John W. McGonigle
Wesley W. Posvar VICE PRESIDENT AND SECRETARY
Marjorie P. Smuts David M. Taylor
ASSISTANT TREASURER
Jeannette Fisher-Garber
ASSISTANT SECRETARY
</TABLE>
Mutual funds are not bank deposits or obligations, are not
guaranteed by any bank, and are not insured or guaranteed by the
FDIC, the Federal Reserve Board, or any other government agency.
Although money market funds seek to maintain a stable net asset
value of $1.00 per share, there is no assurance that they will be
able to do so.
This report is authorized for distribution to prospective
investors only when preceded or accompanied by the Fund's
prospectus which contains facts concerning its objective and
policies, management fees, expenses and other information.
----------------------------------------
- --------------------------------------------------
----------------------------------------
PRIME
- -------------------------
--------------------
OBLIGATIONS
- -------------------------
--------------------
FUND
- -------------------------
--------------------
- -------------------------
--------------------
ANNUAL REPORT
TO SHAREHOLDERS
JULY 31, 1994
[LOGO] ----------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
--------------------------------------------------------
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
-------------------------------------------------------------------------
[LOGO]
RECYCLED
PAPER
60934N708
60934N203
G00645-02 (9/94)
- ---------------------------------------------------
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for Treasury
Obligations Fund (the "Fund") which covers the twelve-month period ended July
31, 1994. The report begins with the Fund's Investment Review, followed by
Financial Statements containing the Fund's Portfolio of Investments. In
addition, the Financial Highlights tables have been included for Institutional
Shares and Institutional Service Shares.
The Fund continues to put your cash to work pursuing current income consistent
with stability of principal,* while giving you daily access to your money. At
the end of the period, more than 80% of the Fund's net assets were invested in
repurchase agreements fully collateralized by short-term U.S. Treasury
securities. The remainder of Fund net assets were invested directly in
short-term U.S. Treasury securities.
During the twelve-month reporting period, dividends paid to shareholders totaled
$81.3 million. At the end of the period, net assets stood at $2.6 billion.
Thank you for putting your cash to work through Treasury Obligations Fund. Your
questions and comments are always welcome.
Sincerely,
[Art to Come]
J. Christopher Donahue
President
September 15, 1994
* ALTHOUGH NO MONEY MARKET MUTUAL FUND CAN GUARANTEE A STABLE $1.00 SHARE VALUE,
THE FUND HAS DONE SO SINCE ITS INCEPTION.
1
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
Treasury Obligations Fund (the "Fund") which is rated AAAm by Standard & Poor's
Ratings Group and Aaa by Moody's Investors Service, Inc.*, is invested in direct
obligations of the U.S. Treasury, either in the form of notes and bills or as
collateral for repurchase agreements. Recently, the Fund has been managed with a
rather conservative average maturity of 30-40 days.
The annual reporting period brought the first changes in Federal Reserve Board
(the "Fed") monetary policy since September, 1992. Throughout the first half of
the fiscal year, the Fed continued to target a Federal Funds ("Fed Funds") rate
target of 3%, and movements in short-term rates were driven largely by market
sentiment. Short-term rates declined through late September, 1993, as
inflationary worries subsided in the face of weaker economic growth and
favorable reports on consumer and producer prices. Confronted with strong fourth
quarter economic growth, short-term rates climbed higher through November, 1993,
on speculation that the Fed might be moved to tighten monetary policy in the
first half of 1994 if growth proved to be sustainable. Rates then drifted lower
through the end of January, 1994. In early February, 1994, the Fed took the
first in a series of tightenings in monetary policy, by raising the Fed Funds
rate target by 25 basis points. Further tightenings ensued in March, April, and
May, with the Fed Funds rate target standing at 4.25% at the fiscal year ended
in July. A comparison of six-month Treasury bill rates during the same time
frame showed a decline from 3.3% to 3.1% in late September, followed by a rise
to 3.4% at the end of November and then a decline to 3.2% by the end of January,
1994. Treasury bill rates moved in step with, and often led, the tightening
moves by the Fed in the second half of the fiscal year. The rate on the
six-month Treasury bill rose to close to 5.0% by the end of July.
The Fund's average maturity drifted shorter over the reporting period, in
response to the uncertain environment created by the Fed. A yield advantage
continued to exist for investments in repurchase agreements versus direct
investments in short-term Treasury securities. The Fund added to its position in
repurchase agreements to increase its responsiveness to changes in short-term
interest rates as well as to maintain the flexibility to reinvest at anticipated
higher interest rates. The Fund combined this position in repurchase agreements
with the purchase of securities with longer maturities of six to twelve months.
This portfolio structure continues to provide a competitive yield.
Shortly after the end of the reporting period, the Fed tightened policy once
more, moving the Fed Funds target rate from 4.25% to 4.75%. The actions by the
Fed appear to have kept inflationary pressures at bay at the present, as
measured by the traditional releases on consumer and producer prices. Still,
market participants anticipate yet another tightening by the Fed before the end
of the year as the economy continues strong and upward pressures on capacity and
commodity prices persist. In light of the expectations of additional tightenings
in monetary policy, the Fund is expected to continue to maintain its
conservative posture in the near future, while seeking to maximize performance
through ongoing relative value analysis. However, changing economic and market
developments are continuously monitored to best serve our clients attracted to
the short-term U.S. government market.
* RATINGS ARE SUBJECT TO CHANGE.
2
TREASURY OBLIGATIONS FUND
PORTFOLIO OF INVESTMENTS
JULY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------------- --------------------------------------------------------------------------------------------- ---------------
<C> <S> <C>
SHORT-TERM U.S. TREASURY OBLIGATIONS--19.7%
- -------------------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS--5.2%
---------------------------------------------------------------------------------------------
$ 139,000,000 3.16%-5.25%, 8/4/94-7/27/95 $ 135,577,395
--------------------------------------------------------------------------------------------- ---------------
U.S. TREASURY NOTES--14.5%
---------------------------------------------------------------------------------------------
372,000,000 3.875%--12.625%, 8/15/94--4/15/95 374,750,173
--------------------------------------------------------------------------------------------- ---------------
TOTAL SHORT-TERM U.S. TREASURY OBLIGATIONS 510,327,568
--------------------------------------------------------------------------------------------- ---------------
*REPURCHASE AGREEMENTS--80.2%
- -------------------------------------------------------------------------------------------------------------
190,000,000 B.T. Securities Corp., 4.27%, dated 7/29/94, due 8/1/94 190,000,000
---------------------------------------------------------------------------------------------
50,100,000 BZW Securities, Inc., 4.23%, dated 7/29/94, due 8/1/94 50,100,000
---------------------------------------------------------------------------------------------
115,000,000 Bear, Stearns & Co., Inc., 4.22%, dated 7/29/94, due 8/1/94 115,000,000
---------------------------------------------------------------------------------------------
100,000,000 Chemical Securities, Inc., 4.22%, dated 7/29/94, due 8/1/94 100,000,000
---------------------------------------------------------------------------------------------
115,000,000 Daiwa Securities America, Inc., 4.20%, dated 7/29/94, due 8/1/94 115,000,000
---------------------------------------------------------------------------------------------
65,000,000 Dean Witter Reynolds, Inc., 4.27%, dated 7/29/94, due 8/1/94 65,000,000
---------------------------------------------------------------------------------------------
115,000,000 Deutsche Bank Government Securities, 4.27%, dated 7/29/94, due 8/1/94 115,000,000
---------------------------------------------------------------------------------------------
115,000,000 Donaldson, Lufkin & Jenrette Securities Corp., 4.22%, dated 7/29/94, due 8/1/94 115,000,000
---------------------------------------------------------------------------------------------
110,000,000 Fuji Securities, Inc., 4.21%, dated 7/29/94, due 8/1/94 110,000,000
---------------------------------------------------------------------------------------------
50,000,000 Harris Government Securities, Inc., 4.27%, dated 7/29/94, due 8/1/94 50,000,000
---------------------------------------------------------------------------------------------
85,000,000 HSBC Securities, Inc., 4.27%, dated 7/29/94, due 8/1/94 85,000,000
---------------------------------------------------------------------------------------------
30,000,000 J.P. Morgan Securities, Inc., 4.25%, dated 7/29/94, due 8/1/94 30,000,000
---------------------------------------------------------------------------------------------
115,000,000 Kidder, Peabody & Co., Inc., 4.22%, dated 7/29/94, due 8/1/94 115,000,000
---------------------------------------------------------------------------------------------
115,000,000 NCNB of North Carolina-Charlotte, 4.22%, dated 7/29/94, due 8/1/94 115,000,000
---------------------------------------------------------------------------------------------
115,000,000 Nikko Securities Co. International, Inc., 4.22%, dated 7/29/94, due 8/1/94 115,000,000
---------------------------------------------------------------------------------------------
</TABLE>
3
TREASURY OBLIGATIONS FUND
- ---------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------------- --------------------------------------------------------------------------------------------- ---------------
<C> <S> <C>
*REPURCHASE AGREEMENTS--CONTINUED
- -------------------------------------------------------------------------------------------------------------
$ 40,000,000 Nomura Securities International, Inc., 4.22%, dated 7/29/94, due 8/1/94 $ 40,000,000
---------------------------------------------------------------------------------------------
75,000,000 Smith Barney, Inc., 4.27%, dated 7/29/94, due 8/1/94 75,000,000
---------------------------------------------------------------------------------------------
50,000,000 State Street Bank and Trust Co., 4.23%, dated 7/29/94, due 8/1/94 50,000,000
---------------------------------------------------------------------------------------------
150,000,000 UBS Securities, Inc., 4.30%, dated 7/29/94, due 8/1/94 150,000,000
---------------------------------------------------------------------------------------------
49,000,000(a) First Boston Corp., 4.40%, dated 7/14/94, due 8/15/94 49,000,000
---------------------------------------------------------------------------------------------
52,000,000(a) Goldman, Sachs & Co., 4.58%, dated 6/30/94, due 9/28/94 52,000,000
---------------------------------------------------------------------------------------------
45,000,000(a) Goldman, Sachs & Co., 4.58%, dated 7/20/94, due 10/18/94 45,000,000
---------------------------------------------------------------------------------------------
32,000,000(a) Merrill Lynch Government Securities, Inc., 4.25%, dated 5/6/94, due 8/4/94 32,000,000
---------------------------------------------------------------------------------------------
10,000,000(a) Merrill Lynch Government Securities, Inc., 4.45%, dated 6/7/94, due 9/6/94 10,000,000
---------------------------------------------------------------------------------------------
54,000,000(a) Merrill Lynch Government Securities, Inc., 4.55%, dated 7/28/94, due 9/26/94 54,000,000
---------------------------------------------------------------------------------------------
36,000,000(a) Morgan Stanely & Co., Inc., 4.53%, dated 7/7/94, due 9/6/94 36,000,000
--------------------------------------------------------------------------------------------- ---------------
TOTAL REPURCHASE AGREEMENTS (NOTE 2B) 2,078,100,000
--------------------------------------------------------------------------------------------- ---------------
TOTAL INVESTMENTS, AT AMORTIZED COST $ 2,588,427,568+
--------------------------------------------------------------------------------------------- ---------------
<FN>
* Repurchase agreements are fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio. The
investments in repurchase agreements are through participation in joint
accounts with other Federated funds.
(a) Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase
agreement.
+ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($2,591,862,453) at July 31, 1994.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
4
TREASURY OBLIGATIONS FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------------------
Investments in repurchase agreements (Note 2B) $ 2,078,100,000
- ----------------------------------------------------------------
Investments in other securities (Note 2A) 510,327,568
- ---------------------------------------------------------------- ---------------
Total investments, at amortized cost and value $ 2,588,427,568
- ----------------------------------------------------------------------------------
Cash 167,688
- ----------------------------------------------------------------------------------
Interest receivable 11,489,781
- ----------------------------------------------------------------------------------
Deferred expenses (Note 2F) 13,524
- ---------------------------------------------------------------------------------- ---------------
Total assets 2,600,098,561
- ----------------------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------------------
Dividends payable 8,053,840
- ----------------------------------------------------------------
Accrued expenses 182,268
- ---------------------------------------------------------------- ---------------
Total liabilities 8,236,108
- ---------------------------------------------------------------------------------- ---------------
NET ASSETS for 2,591,862,453 shares of beneficial interest
outstanding $ 2,591,862,453
- ---------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
Institutional Shares ($2,582,975,194 DIVIDED BY 2,582,975,194 shares of beneficial
interest outstanding) $ 1.00
- ---------------------------------------------------------------------------------- ---------------
Institutional Service Shares ($8,887,259 DIVIDED BY 8,887,259 shares of beneficial
interest outstanding) $ 1.00
- ---------------------------------------------------------------------------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
5
TREASURY OBLIGATIONS FUND
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------
Interest income (Note 2C) $86,277,025
- -------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------
Investment advisory fee* $4,939,384
- ------------------------------------------------------------
Trustees' fees 25,033
- ------------------------------------------------------------
Administrative personnel and services fees* 1,380,769
- ------------------------------------------------------------
Custodian fees 151,436
- ------------------------------------------------------------
Portfolio accounting fees* 190,423
- ------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses* 64,550
- ------------------------------------------------------------
Shareholder services fee--Institutional Shares* 393,605
- ------------------------------------------------------------
Shareholder services fee--Institutional Service Shares* 532
- ------------------------------------------------------------
Fund share registration costs 124,509
- ------------------------------------------------------------
Auditing fees 13,145
- ------------------------------------------------------------
Legal fees 6,794
- ------------------------------------------------------------
Printing and postage 8,148
- ------------------------------------------------------------
Insurance premiums 41,693
- ------------------------------------------------------------
Taxes 18,865
- ------------------------------------------------------------
Miscellaneous 16,468
- ------------------------------------------------------------ ----------
Total expenses 7,375,354
- ------------------------------------------------------------
Deduct--Waiver of investment advisory fee* 2,435,439
- ------------------------------------------------------------ ----------
Net expenses 4,939,915
- ------------------------------------------------------------------------- -----------
Net investment income $81,337,110
- ------------------------------------------------------------------------- -----------
<FN>
* (See Note 4)
</TABLE>
(See Notes which are an integral part of the Financial Statements)
6
TREASURY OBLIGATIONS FUND
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------------
1994 1993
- --------------------------------------------------------------------------- ---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------
Net investment income $ 81,337,110 $ 70,974,313
- --------------------------------------------------------------------------- ---------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- ---------------------------------------------------------------------------
Dividends to shareholders from net investment income
- ---------------------------------------------------------------------------
Institutional Shares (81,325,025) (70,974,313)
- ---------------------------------------------------------------------------
Institutional Service Shares (12,085) --
- --------------------------------------------------------------------------- ---------------- -----------------
Change in net assets from distributions to shareholders (81,337,110) (70,974,313)
- --------------------------------------------------------------------------- ---------------- -----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ---------------------------------------------------------------------------
Proceeds from sale of shares 9,791,368,504 10,440,738,782
- ---------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends
declared 4,797,827 1,335,315
- ---------------------------------------------------------------------------
Cost of shares redeemed (9,736,785,420) (10,341,629,978)
- --------------------------------------------------------------------------- ---------------- -----------------
Change in net assets from Fund share transactions 59,380,911 100,444,119
- --------------------------------------------------------------------------- ---------------- -----------------
Change in net assets 59,380,911 100,444,119
- ---------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------
Beginning of period 2,532,481,542 2,432,037,423
- --------------------------------------------------------------------------- ---------------- -----------------
End of period $ 2,591,862,453 $ 2,532,481,542
- --------------------------------------------------------------------------- ---------------- -----------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
7
TREASURY OBLIGATIONS FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------------------------------
1994 1993 1992 1991 1990*
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.03 0.03 0.05 0.07 0.04
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03) (0.03) (0.05) (0.07) (0.04)
- ---------------------------------------------------------------------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------- --------- --------- --------- --------- ---------
TOTAL RETURN** 3.35% 3.15% 4.61% 7.11% 5.09%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 0.20% 0.20% 0.20% 0.20% 0.20%(b)
- ----------------------------------------------------------------------
Net investment income 3.29% 3.11% 4.49% 6.65% 8.16%(b)
- ----------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.10% 0.07% 0.08% 0.09% 0.15%(b)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $2,582,975 $2,532,482 $2,432,037 $1,678,880 $576,048
- ----------------------------------------------------------------------
<FN>
* Reflects operations for the period from February 23, 1990 (date of initial
public investment) to July 31, 1990.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(b) Computed on an annualized basis.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
8
TREASURY OBLIGATIONS FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICES SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
JULY 31, 1994*
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.003
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.003)
- ---------------------------------------------------------------------- --------------
NET ASSET VALUE, END OF PERIOD $ 1.00
- ---------------------------------------------------------------------- --------------
TOTAL RETURN** 0.29%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 0.39%(b)
- ----------------------------------------------------------------------
Net investment income 4.26%(b)
- ----------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.10%(b)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $8,887
- ----------------------------------------------------------------------
<FN>
* Reflects operations for the period from July 5, 1994 (date of initial
public offering) to July 31, 1994.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(b) Computed on an annualized basis.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
9
TREASURY OBLIGATIONS FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Money Market Obligations Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end, management
investment company. The Trust consists of five diversified portfolios. The
financial statements included herein are only those of Treasury Obligations Fund
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held. Effective July 5,
1994, (the effective date for Institutional Service Shares) the Fund provides
two classes of Shares ("Institutional Shares" and "Institutional Service
Shares").
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve
Book Entry System, or to have segregated within the custodian bank's vault,
all securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the fund to
monitor, on a daily basis, the market value of each repurchase agreement's
underlying collateral to ensure that the value of collateral at least equals
the principal amount of the repurchase agreement, including accrued
interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as brokers/dealers, which are deemed
by the Fund's advisor to be creditworthy pursuant to the guidelines
established by the Board of Trustees (the "Trustees").
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income. Accordingly,
no provisions for federal tax are necessary.
10
TREASURY OBLIGATIONS FUND
- ---------------------------------------------------------
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At July 31, 1994, capital paid-in aggregated $2,591,862,453.
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
----------------------------------
INSTITUTIONAL SHARES 1994 1993
- -------------------------------------------------------------- --------------- ----------------
<S> <C> <C>
Shares sold 9,782,493,254 10,440,738,782
- --------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 4,785,818 1,335,315
- --------------------------------------------------------------
Shares redeemed (9,736,785,420) (10,341,629,978)
- -------------------------------------------------------------- --------------- ----------------
Net change resulting from Institutional Shares transactions 50,493,652 100,444,119
- -------------------------------------------------------------- --------------- ----------------
<CAPTION>
YEAR ENDED JULY
31,
---------------
INSTITUTIONAL SERVICE SHARES 1994*
- -------------------------------------------------------------- ---------------
<S> <C> <C>
Shares sold 8,875,250
- --------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 12,009
- --------------------------------------------------------------
Shares redeemed --
- -------------------------------------------------------------- ---------------
Net change resulting from Institutional Service Shares
transactions 8,887,259
- -------------------------------------------------------------- ---------------
Net change resulting from Fund share transactions 59,380,911
- -------------------------------------------------------------- ---------------
<FN>
* For the period from July 5, 1994 (date of initial public offering) to July 31,
1994.
</TABLE>
11
TREASURY OBLIGATIONS FUND
- ---------------------------------------------------------
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 0.20 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver, at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
administrative personnel and services. Prior to March 1, 1994, these services
were provided at approximate cost. Effective March 1, 1994, the FAS fee is based
on the level of average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors for the period. The administrative fee
received during the period of the Administrative Services Agreement shall be at
least $125,000 per portfolio and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25 of
1% of average net assets of the Fund for the period. This fee is to obtain
certain personal services for shareholders and to maintain the shareholder
accounts.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND ACCOUNTING FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The FServ fee is based on the size, type, and number of accounts and
transactions made by shareholders.
FServ also maintains the Fund's accounting records. The fee is based on the
level of the Fund's average net assets for the period plus, out-of-pocket
expenses.
Certain of the Officers and Trustees of the Fund are Officers and Directors or
Trustees of the above companies.
12
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- -------------------------------------------------------------
To the Shareholders and Board of Trustees of
MONEY MARKET OBLIGATIONS TRUST
(Treasury Obligations Fund):
We have audited the accompanying statement of assets and liabilities of Treasury
Obligations Fund (an investment portfolio of Money Market Obligations Trust, a
Massachusetts business trust), including the schedule of portfolio investments,
as of July 31, 1994, the related statement of operations for the year then
ended, and the statement of changes in net assets for each of the two years in
the period then ended, and the financial highlights for the periods presented.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1994, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Treasury Obligations Fund (an investment portfolio of Money Market Obligations
Trust) as of July 31, 1994, and the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
September 15, 1994
13
<TABLE>
<CAPTION>
TRUSTEES OFFICERS
- ---------------------------------------------------------
<S> <C>
John F. Donahue John F. Donahue
John T. Conroy, Jr. CHAIRMAN
William J. Copeland J. Christopher Donahue
J. Christopher Donahue PRESIDENT
James E. Dowd Richard B. Fisher
Lawrence D. Ellis, M.D. VICE PRESIDENT
Edward L. Flaherty, Jr. Edward C. Gonzales
Peter E. Madden VICE PRESIDENT AND TREASURER
Gregor F. Meyer John W. McGonigle
Wesley W. Posvar VICE PRESIDENT AND SECRETARY
Marjorie P. Smuts David M. Taylor
ASSISTANT TREASURER
Jeannette Fisher-Garber
ASSISTANT SECRETARY
</TABLE>
Mutual funds are not bank deposits or obligations, are not
guaranteed by any bank, and are not insured or guaranteed by the
FDIC, the Federal Reserve Board, or any other government agency.
Although money market funds seek to maintain a stable net asset
value of $1.00 per share, there is no assurance that they will be
able to do so.
This report is authorized for distribution to prospective
investors only when preceded or accompanied by the Fund's
prospectus which contains facts concerning its objective and
policies, management fees, expenses and other information.
----------------------------------------
- ---------------------------------------------------
----------------------------------------
TREASURY
- -------------------------
--------------------
OBLIGATIONS
- -------------------------
--------------------
FUND
- -------------------------
--------------------
- -------------------------
--------------------
ANNUAL REPORT
TO SHAREHOLDERS
JULY 31, 1994
[LOGO] ----------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
--------------------------------------------------------
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
-------------------------------------------------------------------------
[LOGO]
RECYCLED
PAPER
60934N500
60934N872
G00645-04 (9/94)
- ---------------------------------------------------
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for Government
Obligations Fund (the "Fund") which covers the twelve-month period ended July
31, 1994. The report begins with the Fund's Investment Review, followed by
Financial Statements containing the Portfolio of Investments. In addition, the
Financial Highlights Table has been included for Institutional Shares.
The Fund continues to put your cash to work pursuing daily income with stability
of principal,* while giving you daily access to your money. At the end of the
period, more than 70% of the Fund's was invested in repurchase agreements fully
collateralized by U.S. government securities. The remainder of Fund assets was
invested directly in short-term U.S. government obligations.
During the twelve-month reporting period, dividends paid to shareholders totaled
$0.03 per share. At the end of the period, net assets stood at $763.9 million.
Thank you for putting your cash to work through Government Obligations Fund.
Your questions and comments are always welcome.
Sincerely,
J. Christopher Donahue
President
September 15, 1994
* ALTHOUGH NO MONEY MARKET MUTUAL FUND CAN GUARANTEE A STABLE $1.00 SHARE VALUE,
THE FUND HAS DONE SO SINCE ITS INCEPTION.
1
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
Government Obligations Fund (the "Fund") is invested in direct U.S. Treasury and
agency obligations and in repurchase agreements which have these securities as
collateral. As agency yield spreads over Treasuries widened, the Fund's agency
position increased, and the Fund continued to invest in issues of the Federal
National Mortgage Association, Student Loan Marketing Association, Federal Farm
Credit Bank System, Federal Home Loan Bank System, and Federal Home Loan
Mortgage Corporation. The Fund has been combining attractive yields from
overnight repurchase agreements collateralized by mortgage-backed securities
with short-term agency floating rate notes and longer maturity Treasury and
agency securities. Recently, the Fund has been managed with a rather
conservative average maturity of 30-40 days.
The annual reporting period brought the first changes in Federal Reserve (the
"Fed") monetary policy since September 1992. Throughout the first half of the
fiscal year, the Fed continued to target a Federal Funds ("Fed Funds") rate
target of 3%, and movements in short-term rates were driven largely by market
sentiment. Short-term rates declined through late September, 1993, as
inflationary worries subsided in the face of weaker economic growth and
favorable reports on consumer and producer prices. Confronted with strong fourth
quarter economic growth, short-term rates climbed higher through November, 1993,
on speculation that the Fed might be moved to tighten monetary policy in the
first half of 1994 if growth proved to be sustainable. Rates then drifted lower
through the end of January, 1994. In early February, 1994, the Fed took what was
to prove to be the first in a series of tightenings in monetary policy, by
raising the Fed Funds rate target by 25 basis points. Further tightenings ensued
in March, April, and May, with the Fed Funds rate target standing at 4.25% at
the fiscal year ended in July. A comparison of six-month Treasury bill rates
during the same time frame showed a decline from 3.3% to 3.1% in late September,
followed by a rise to 3.4% at the end of November and then a decline to 3.2% by
the end of January, 1994. Treasury bill rates moved in step with, and often led,
the tightening moves by the Fed in the second half of the fiscal year. The rate
on the six-month Treasury bill rose to close to 5.0% by the end of July.
The Fund's average maturity drifted shorter over the reporting period, in
response to the uncertain environment created by the Fed. The Fund continued to
combine attractive yields from repurchase agreements collateralized by U.S.
government mortgage-backed securities with short-term agency floating rate notes
and Treasury and agency securities with longer maturities of 6 to 12 months. The
Fund added to its positions in both repurchase agreements and agency floating
rate notes to increase its responsiveness to changes in short-term interest
rates as well as to maintain the flexibility to reinvest at anticipated higher
interest rates. This portfolio structure continues to provide a competitive
yield.
Shortly after the end of the reporting period, the Fed tightened policy once
more, moving the Fed Funds target rate from 4.25% to 4.75%. While the actions by
the Fed appear to have kept inflationary pressures at bay at the present, as
measured by the traditional releases on consumer and producer prices, market
participants anticipate yet another tightening by the Fed before the end of the
year as the economy continues strong and upward pressures on capacity and
commodity prices persist. In light of the expectations of additional tightenings
in monetary policy, the Fund is expected to continue to maintain its
conservative posture in the near future, while seeking to maximize performance
through ongoing relative value analysis. However, changing economic and market
developments are continuously monitored to best serve our clients attracted to
the short-term U.S. government market.
2
GOVERNMENT OBLIGATIONS FUND
PORTFOLIO OF INVESTMENTS
JULY 31, 1994
- --------------------------------------------------------------------------------
The obligations listed below are issued or guaranteed by the U.S. government,
its agencies or instrumentalities, or secured by such obligations.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------------- -------------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
SHORT-TERM OBLIGATIONS--29.2%
- ------------------------------------------------------------------------------------------------------------------
*FEDERAL HOME LOAN BANK, DISCOUNT NOTES--3.3%
--------------------------------------------------------------------------------------------------
$ 26,000,000 4.05%-5.26%, 9/7/94 - 4/24/95 $ 25,446,771
-------------------------------------------------------------------------------------------------- ------------
**FEDERAL NATIONAL MORTGAGE ASSOCIATION, FLOATING RATE NOTE--1.3%
--------------------------------------------------------------------------------------------------
10,000,000 4.52%, 8/5/94 9,999,186
-------------------------------------------------------------------------------------------------- ------------
*FEDERAL NATIONAL MORTGAGE ASSOCIATION, DISCOUNT NOTES--16.9%
--------------------------------------------------------------------------------------------------
130,500,000 3.41%-4.93%, 8/8/94 - 2/15/95 128,960,491
-------------------------------------------------------------------------------------------------- ------------
**STUDENT LOAN MARKETING ASSOCIATION, FLOATING RATE NOTES--2.5%
--------------------------------------------------------------------------------------------------
19,230,000 4.94%-5.14%, 8/5/94 19,282,452
-------------------------------------------------------------------------------------------------- ------------
*U.S. TREASURY BILLS--1.0%
--------------------------------------------------------------------------------------------------
7,500,000 3.60%-3.93%, 11/17/94 - 2/9/95 7,401,300
-------------------------------------------------------------------------------------------------- ------------
U.S. TREASURY NOTES--4.2%
--------------------------------------------------------------------------------------------------
32,000,000 5.50%-8.625%, 8/15/94 - 2/15/94 32,174,217
-------------------------------------------------------------------------------------------------- ------------
TOTAL SHORT-TERM OBLIGATIONS 223,264,417
-------------------------------------------------------------------------------------------------- ------------
***REPURCHASE AGREEMENTS--70.7%
- ------------------------------------------------------------------------------------------------------------------
25,000,000 B.T. Securities Corp., 4.27%, dated 7/29/94, due 8/1/94 25,000,000
--------------------------------------------------------------------------------------------------
35,300,000 BZW Securities, Inc., 4.23%-4.32%, dated 7/29/94, due 8/1/94 35,300,000
--------------------------------------------------------------------------------------------------
35,000,000 Deutsche Bank Government Securities, Inc., 4.29%, dated 7/29/94, due 8/1/94 35,000,000
--------------------------------------------------------------------------------------------------
35,000,000 Fuji Securities, Inc., 4.29%, dated 7/29/94, due 8/1/94 35,000,000
--------------------------------------------------------------------------------------------------
35,000,000 HSBC Securities, Inc., 4.29%, dated 7/29/94, due 8/1/94 35,000,000
--------------------------------------------------------------------------------------------------
15,000,000 J.P. Morgan Securities, Inc., 4.33%, dated 7/29/94, due 8/1/94 15,000,000
--------------------------------------------------------------------------------------------------
130,000,000 Merrill Lynch Government Securities, Inc., 4.27%, dated 7/29/94 due 8/1/94 130,000,000
--------------------------------------------------------------------------------------------------
35,000,000 Smith Barney, Inc., 4.29%, dated 7/29/94, due 8/1/94 35,000,000
--------------------------------------------------------------------------------------------------
</TABLE>
3
GOVERNMENT OBLIGATIONS FUND
- ---------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------------- -------------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
***REPURCHASE AGREEMENTS--CONTINUED
- ------------------------------------------------------------------------------------------------------------------
$ 130,000,000 UBS Securities, Inc., 4.30%, dated 7/29/94, due 8/1/94 $130,000,000
--------------------------------------------------------------------------------------------------
16,000,000(a) First Boston Corp., 4.50%, dated 7/13/94, due 8/15/94 16,000,000
--------------------------------------------------------------------------------------------------
19,000,000(a) Goldman, Sachs & Co., 4.40%, dated 7/20/94, due 8/22/94 19,000,000
--------------------------------------------------------------------------------------------------
10,000,000(a) Morgan Stanley & Co., Inc., 4.60%, dated 7/5/94, due 9/6/94 10,000,000
--------------------------------------------------------------------------------------------------
10,000,000(a) Merrill Lynch Government Securities, Inc., 4.625%, dated 6/29/94, due 9/26/94 10,000,000
--------------------------------------------------------------------------------------------------
10,000,000(a) First Boston Corp., 4.65%, dated 6/30/94, due 9/28/94 10,000,000
-------------------------------------------------------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS (NOTE 2B) 540,300,000
-------------------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST (NOTE 2A) $763,564,417+
-------------------------------------------------------------------------------------------------- ------------
<FN>
* Each issue shows the rate of discount at the time of purchase.
** Current rate and next demand date shown.
*** Repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
The investments in repurchase agreements are through participation in
joint accounts with other Federated funds.
(a) Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase
agreement.
+ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($763,878,864) at July 31, 1994.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
4
GOVERNMENT OBLIGATIONS FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------------------------
Investments in repurchase agreements (Note 2B) $540,300,000
- --------------------------------------------------------------------
Investments in other securities (Note 2A) 223,264,417
- -------------------------------------------------------------------- ------------
Total investments, at amortized cost and value $763,564,417
- -----------------------------------------------------------------------------------
Cash 604,822
- -----------------------------------------------------------------------------------
Receivable for Fund shares sold 862,560
- -----------------------------------------------------------------------------------
Interest receivable 1,333,777
- -----------------------------------------------------------------------------------
Deferred expenses (Note 2F) 2,972
- ----------------------------------------------------------------------------------- ------------
Total assets 766,368,548
- -----------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------------------------
Dividends payable 2,388,394
- --------------------------------------------------------------------
Accrued expenses 101,290
- -------------------------------------------------------------------- ------------
Total liabilities 2,489,684
- ----------------------------------------------------------------------------------- ------------
NET ASSETS for 763,878,864 shares of beneficial interest outstanding $763,878,864
- ----------------------------------------------------------------------------------- ------------
NET ASSETS VALUE, Offering Price, and Redemption Proceeds Per Share:
($763,878,864 DIVIDED BY 763,878,864 shares of beneficial interest
outstanding) $ 1.00
- ----------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
5
GOVERNMENT OBLIGATIONS FUND
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------------------
Interest income (Note 2C) $24,117,277
- -------------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------
Investment advisory fee* $1,348,444
- ------------------------------------------------------------------------
Trustees' fees 7,658
- ------------------------------------------------------------------------
Administrative personnel and services fees* 483,421
- ------------------------------------------------------------------------
Custodian fees 116,951
- ------------------------------------------------------------------------
Portfolio accounting fees* 96,728
- ------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses* 21,637
- ------------------------------------------------------------------------
Shareholder services fees* 118,603
- ------------------------------------------------------------------------
Fund share registration costs 80,644
- ------------------------------------------------------------------------
Auditing fees 13,345
- ------------------------------------------------------------------------
Legal fees 14,633
- ------------------------------------------------------------------------
Printing and postage 3,726
- ------------------------------------------------------------------------
Insurance premiums 17,686
- ------------------------------------------------------------------------
Taxes 10,312
- ------------------------------------------------------------------------
Miscellaneous 5,373
- ------------------------------------------------------------------------ ----------
Total expenses 2,339,161
- ------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee* 990,717
- ------------------------------------------------------------------------ ----------
Net expenses 1,348,444
- ------------------------------------------------------------------------------------- -----------
Net investment income $22,768,833
- ------------------------------------------------------------------------------------- -----------
<FN>
* (See Note 4)
</TABLE>
(See Notes which are an integral part of the Financial Statements)
6
GOVERNMENT OBLIGATIONS FUND
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
----------------------------------
1994 1993
- ----------------------------------------------------------------------- --------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------
Net investment income $ 22,768,833 $ 21,244,766
- ----------------------------------------------------------------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- -----------------------------------------------------------------------
Dividends to shareholders from net investment income (22,768,833) (21,244,766)
- ----------------------------------------------------------------------- --------------- ---------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- -----------------------------------------------------------------------
Proceeds from sale of shares 3,045,297,053 3,260,455,593
- -----------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 1,181,007 365,899
- -----------------------------------------------------------------------
Cost of shares redeemed (2,989,745,626) (3,233,207,743)
- ----------------------------------------------------------------------- --------------- ---------------
Change in net assets from Fund share transactions 56,732,434 27,613,749
- ----------------------------------------------------------------------- --------------- ---------------
Change in net assets 56,732,434 27,613,749
- -----------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------
Beginning of period 707,146,430 679,532,681
- ----------------------------------------------------------------------- --------------- ---------------
End of period $ 763,878,864 $ 707,146,430
- ----------------------------------------------------------------------- --------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
7
GOVERNMENT OBLIGATIONS FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Institutional Service Shares were not being offered as of July 31, 1994.
Accordingly, there are no Financial Highlights for such Shares. The Financial
Highlights presented below are historical information for Institutional Shares.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------------------------------
1994 1993 1992 1991 1990*
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.03 0.03 0.05 0.07 0.03
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03) (0.03) (0.05) (0.07) (0.03)
- ---------------------------------------------------------------------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------- --------- --------- --------- --------- ---------
TOTAL RETURN** 3.41% 3.22% 4.70% 7.20% 2.80%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 0.20% 0.20% 0.20% 0.20% 0.20%(b)
- ----------------------------------------------------------------------
Net investment income 3.38% 3.16% 4.55% 6.77% 8.24%(b)
- ----------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.15% 0.11% 0.12% 0.22% 0.34%(b)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period
(000 omitted) $ 763,879 $ 707,146 $ 679,533 $ 331,454 $ 148,598
- ----------------------------------------------------------------------
<FN>
* Reflects operations for the period from March 31, 1990 (date of initial
public investment) to July 30, 1990.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(b) Computed on an annualized basis.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
8
GOVERNMENT OBLIGATIONS FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Money Market Obligations Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end, management
investment company. The Trust consists of five diversified portfolios. The
financial statements included herein are only those of Government Obligations
Fund (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
Effective July 5, 1994, (the effective date for Institutional Service Shares)
the Fund provides two classes of shares ("Institutional Shares" and
"Institutional Service Shares"). As of July 31, 1994, Institutional Service
Shares did not have public investment.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve
Entry System, or to have segregated within the custodian bank's vault, all
securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Fund to
monitor, on a daily basis, the market value of each repurchase agreement's
underlying collateral to ensure that the value of collateral at least equals
the principal amount of the repurchase agreement, including accrued
interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as brokers/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees (the "Trustees"). Risks may arise from
the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
9
GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income. Accordingly,
no provisions for federal tax are necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At July
31, 1994, capital paid-in aggregated $763,878,864. Transactions in Fund shares
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
---------------------------------
INSTITUTIONAL SHARES 1994 1993
- -------------------------------------------------- --------------- ---------------
<S> <C> <C>
Shares sold 3,045,297,053 3,260,455,593
- --------------------------------------------------
Shares issued to shareholders in payment of
dividends declared 1,181,007 365,899
- --------------------------------------------------
Shares redeemed (2,989,745,626) (3,233,207,743)
- -------------------------------------------------- --------------- ---------------
Net change resulting from Institutional Share
transactions 56,732,434 27,613,749
- -------------------------------------------------- --------------- ---------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .20 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver, at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
administrative personnel and services. Prior to March 1, 1994, these services
were provided at approximate cost. Effective March 1, 1994, the FAS fee is based
on the level of average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors for the period. The administrative fee
received during the period of the Administrative Services Agreement shall be at
least $125,000 per portfolio and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of the Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25 of
1% of average net assets of the Fund
10
GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
for the period. This fee is to obtain certain personal services for shareholders
and to maintain the shareholder accounts.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND ACCOUNTING FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The FServ fee is based on the size, type and number of accounts and
transactions made by shareholders.
FServ also maintains the Fund's accounting records. The fee is based on the
level of the Fund's average net assets for the period plus, out-of-pocket
expenses.
Certain Officers and Trustees of the Fund are Officers and Directors or Trustees
of the above companies.
11
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- -------------------------------------------------------------
To the Shareholders and Board of Trustees of
MONEY MARKET OBLIGATIONS TRUST
(Government Obligations Fund):
We have audited the accompanying statement of assets and liabilities of
Government Obligations Fund (an investment portfolio of Money Market Obligations
Trust, a Massachusetts business trust), including the schedule of portfolio
investments, as of July 31, 1994, the related statement of operations for the
year then ended, and the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for the periods
presented. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1994, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Government Obligations Fund (an investment portfolio of Money Market Obligations
Trust) as of July 31, 1994, and the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
September 15, 1994
12
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- ---------------------------------------------------------
John F. Donahue John F. Donahue
John T. Conroy, Jr. CHAIRMAN
William J. Copeland J. Christopher Donahue
J. Christopher Donahue PRESIDENT
James E. Dowd Richard B. Fisher
Lawrence D. Ellis, M.D. VICE PRESIDENT
Edward L. Flaherty, Jr. Edward C. Gonzales
Peter E. Madden VICE PRESIDENT AND TREASURER
Gregor F. Meyer John W. McGonigle
Wesley W. Posvar VICE PRESIDENT AND SECRETARY
Marjorie P. Smuts David M. Taylor
ASSISTANT TREASURER
Jeannette Fisher-Garber
ASSISTANT SECRETARY
</TABLE>
Mutual funds are not bank deposits or obligations, are not
guaranteed by any bank, and are not insured or guaranteed by the
FDIC, the Federal Reserve Board, or any other government agency.
Although money market funds seek to maintain a stable net asset
value of $1.00 per share, there is no assurance that they will be
able to do so.
This report is authorized for distribution to prospective
investors only when preceded or accompanied by the Fund's
prospectus which contains facts concerning its objectives and
policies, management fees, expenses and other information.
----------------------------------------
- --------------------------------------------------
----------------------------------------
GOVERNMENT
- -------------------------
--------------------
OBLIGATIONS
- -------------------------
--------------------
FUND
- -------------------------
--------------------
- -------------------------
--------------------
ANNUAL REPORT
TO SHAREHOLDERS
JULY 31, 1994
[LOGO] ----------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
--------------------------------------------------------
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
-------------------------------------------------------------------------
[LOGO]
RECYCLED
PAPER
60934N104
60934N807
G00645-01 (9/94)
- ---------------------------------------------------
PRESIDENT'S MESSAGE
- -------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for Tax-Free
Obligations Fund (the "Fund") which covers the twelve-month period ended July
31, 1994. The report begins with the Fund's Investment Review, followed by
Financial Statements containing the Fund's Portfolio of Investments. In
addition, the Financial Highlights table has been included for Institutional
Shares and Institutional Service Shares.
The Fund continues to put your money to work pursuing income exempt from federal
regular income tax* and consistent with stability of principal** while giving
you daily access to your money. At the end of the period, the Fund's net assets
were invested in a diversified portfolio of short-term municipal securities.
During the twelve-month reporting period, tax-free dividends paid to
shareholders totaled $16.8 million. Assets in the Fund almost doubled during the
period, reaching $815 million at the period's end compared to $454 million at
the beginning of the period.
Thank you for putting your cash to work through Tax-Free Obligations Fund. We
welcome your questions and comments.
Sincerely,
J. Christopher Donahue
President
September 15, 1994
* INCOME MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX AND STATE AND
LOCAL TAXES.
** ALTHOUGH NO MONEY MARKET MUTUAL FUND CAN GUARANTEE A STABLE $1.00 SHARE
VALUE, THE FUND HAS DONE SO SINCE ITS INCEPTION.
1
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
Tax-Free Obligations Fund (the "Fund") invests in investment grade quality,
short-term debt securities and seeks to maintain a stable net asset value of
$1.00 per share. For the twelve-month period ended July 31, 1994, the Fund paid
shareholders a net annualized return of 2.45%*. This is equivalent to a taxable
money market fund return of 4.06% in the highest federal tax bracket of 39.6%.
The first few months of the reporting period were characterized by slow economic
growth coupled with low inflationary pressures. With little threat of inflation
the municipal markets responded with some of the lowest yields over the past
decade in both the bond and money markets.
In the first quarter of 1994, there was a shift in the outlook for the economy
and, in turn, short-term interest rates. Signs of economic strength prompted the
Federal Reserve Board (the "Fed") to twice "tighten" or increase short-term
interest rates, moving the Federal Funds ("Fed Funds") rate target from 3.0% to
3.5%. The Fed again tightened twice in the second quarter of 1994 (in mid-April
and mid-May) moving the Fed Funds rate target from 3.50% to 4.25%. The Fed then
held short-term rates stable until August 16th when they increased the Fed Funds
rate target another .50% to 4.75%. The August 16th tightening brings the
cumulative increase in the Fed Funds rate target this year to 1.75%.
The municipal money market, particularly the municipal note market, reacted to
the Fed policy with corresponding increase in rates. The Bond Buyer Note
Index**, a proxy for one-year municipal notes, started the period at 2.95% and
steadily increased 1.05% to end the period at 4.00%. Although yields on 12-month
tax-free notes did rise, they did not increase by the same magnitude as on
comparable maturity taxable instruments. In July, 1993, the one-year tax-exempt
note yield was 84% of the taxable yield; in July, 1994, it was 75%. The
direction of rates on tax-free variable rate demand notes ("VRDNs"), which
comprise 50% of the Fund's assets, increased as well over the period. VRDNs
yields started the period at 2.90% and increased slightly to 3.15% by July 31,
1994. However, because VRDNs are particularly affected by a variety of
supply/demand and seasonal factors, VRDNs yields displayed significant
volatility over the period.
The average portfolio maturity of the Fund was shortened from the 65-day range
at the beginning of August, 1993, to the 50-day range in July, 1994. We expect
further tightening by the Fed before the end of the year if the U.S. economic
expansion continues. In this environment of potentially higher short-term
interest rates, we will continue to keep the average maturity short and
portfolio liquid while choosing carefully and selectively along the yield curve
as attractive fixed income opportunities appear.
*PERFORMANCE QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE
RESULTS.
**THIS INDEX IS UNMANAGED.
2
TAX-FREE OBLIGATIONS FUND
PORTFOLIO OF INVESTMENTS
JULY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S OR
AMOUNT S&P* VALUE
- ---------- ------------------------------------------------------- ---------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--99.5%
- -------------------------------------------------------------------
ALABAMA--3.0%
-------------------------------------------------------
$1,645,000 Alabama Special Care Facilities, 3.90% Annual TOBs
(Series 1984A)/(Montgomery Hospital)/(AMBAC Insured),
Optional Tender, 7/1/95 A-1 $ 1,645,000
-------------------------------------------------------
3,000,000 Alabama State Public School And College Authority,
3.70% TRANs (Escrowed in Treasuries), Mandatory Tender,
11/1/94 NR(1) 3,006,652
-------------------------------------------------------
500,000 Birmingham, AL, Medical Clinic Board Daily VRDNs
(University of Alabama Health Services Foundation)/
(Morgan Guaranty Trust Co. LOC) A-1+ 500,000
-------------------------------------------------------
1,000,000 Bon Air, AL, IDB Weekly VRDNs (Avondale Mills, Inc.)/
(Trust Company Bank LOC) P-1 1,000,000
-------------------------------------------------------
4,200,000 Huntsville, AL, Health Care Authority/Health Care
Facilities Weekly VRDNs (Series 1992B)/(MBIA Insured) VMIGI 4,200,000
-------------------------------------------------------
2,000,000 Huntsville, AL, Health Care Authority/Health Care
Facilities Weekly VRDNs (Series 1994A)/(MBIA Insured) A-1 2,000,000
-------------------------------------------------------
395,000 Huntsville, AL, IDA Weekly FRDNs (Parkway)/(First
Alabama Bank LOC) A-1 395,000
-------------------------------------------------------
500,000 Madison, AL, IDA Weekly VRDNs (Series A)/(Executive Inn
Ltd.)/(AmSouth Bank N.A. LOC) A-1 500,000
-------------------------------------------------------
4,000,000 Mobile, AL, IDB, PCR Weekly VRDNs (Series 1993B)/
(Alabama Power Co. Guaranty) A-1 4,000,000
-------------------------------------------------------
6,365,000 Montgomery, AL, IDB, Pollution Control & Solid Waste
Disposal Revenue, 3.20% CP, (General Electric Co.
Guaranty), Mandatory Tender, 8/25/94 A-1+ 6,365,000
-------------------------------------------------------
1,000,000 Tuscaloosa County, AL, Port Authority Weekly VRDNs
(Series 1989A)/(Capstone Hotel Ltd.)/(South Trust Bank
of Alabama LOC) P-1 1,000,000
------------------------------------------------------- -----------
Total 24,611,652
------------------------------------------------------- -----------
</TABLE>
3
TAX-FREE OBLIGATIONS FUND
- ---------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S OR
AMOUNT S&P* VALUE
- ---------- ------------------------------------------------------- ---------- -----------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
<C> <S> <C> <C>
- -------------------------------------------------------------------
ALASKA--0.9%
-------------------------------------------------------
$7,100,000 Valdez, AK, Marine Terminal Revenue Bonds, 3.20% CP,
(Exxon Pipeline Company Guaranty), Mandatory Tender,
10/19/94 A-1+ $ 7,100,000
------------------------------------------------------- -----------
ARIZONA--0.9%
-------------------------------------------------------
7,200,000 Phoenix, AZ, Daily VRDNs (Series 1994) A-1+ 7,200,000
------------------------------------------------------- -----------
ARKANSAS--0.1%
-------------------------------------------------------
1,000,000 Sheridan, AR, IDA Weekly VRDNs (H.H. Robertson Co.)/
(PNC Bank N.A. LOC) VMIGI 1,000,000
------------------------------------------------------- -----------
CALIFORNIA--4.4%
-------------------------------------------------------
10,000,000 California School Cash Reserve Program Authority, 4.50%
TRANs (Series 1994A)/(Industrial Bank of Japan Ltd.
LOC), 6/28/95 MIGI 10,056,769
-------------------------------------------------------
7,500,000 California School Cash Reserve Program Authority,
4.50%, TRANs, (Series 1994A)/(California School Cash
Reserve Program), 7/5/95 MIGI 7,550,144
-------------------------------------------------------
7,000,000 Kern, CA, Community College District, 4.625% BANs (1994
Project Refunding Notes), 7/15/95 MIGI 7,036,873
-------------------------------------------------------
6,000,000 San Jose, CA, Unified School District, 4.25% TRANs,
7/5/95 SP-1+ 6,029,417
-------------------------------------------------------
5,000,000 Student Education Loan Marketing Corp., CA, 2.65%
Annual TOBS (Series 1993A)/(Dresdner Bank AG LOC),
Mandatory Tender, 11/1/94 A-1+ 5,000,000
------------------------------------------------------- -----------
Total 35,673,203
------------------------------------------------------- -----------
COLORADO--0.3%
-------------------------------------------------------
2,750,000 Denver (City and County), CO, 3.50% Annual TOBs (MBIA
Insured), Mandatory Tender, 12/15/94 A-1+ 2,750,000
------------------------------------------------------- -----------
CONNECTICUT--2.2%
-------------------------------------------------------
4,000,000 Connecticut Development Authority Weekly VRDNs
(Independence Living, Inc.)/(Credit Commercial de
France LOC) VMIG1 4,000,000
-------------------------------------------------------
</TABLE>
4
TAX-FREE OBLIGATIONS FUND
- ---------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S OR
AMOUNT S&P* VALUE
- ---------- ------------------------------------------------------- ---------- -----------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
<C> <S> <C> <C>
- -------------------------------------------------------------------
CONNECTICUT--CONTINUED
-------------------------------------------------------
$6,000,000 Connecticut State HFA, 2.80% Annual TOBs (Series
1993E-1)(Housing Mortgage Finance Program), Mandatory
Tender, 11/15/94 A-1+ $ 6,000,000
-------------------------------------------------------
7,900,000 Connecticut State Transportation Infrastructure
Authority Weekly VRDNs (Industrial Bank of Japan Ltd.
LOC) A-1 7,900,000
------------------------------------------------------- -----------
Total 17,900,000
------------------------------------------------------- -----------
DELAWARE--0.6%
-------------------------------------------------------
5,100,000 Delaware Health Facilities Authority Weekly VRDNs
(Series 1985 BTP-19A)/(The Medical Center of Delaware)/
(MBIA Insured) NR(1) 5,100,000
------------------------------------------------------- -----------
DISTRICT OF COLUMBIA--1.2%
-------------------------------------------------------
10,000,000 District of Columbia, 3.50% TRANs (Swiss Bank Corp.
LOC), 9/30/94 SP-1+ 10,004,521
------------------------------------------------------- -----------
FLORIDA--9.0%
-------------------------------------------------------
11,625,000 Eustis Health Facilities Authority, FL, Weekly VRDNs
(Series 1985)/(Waterman Medical Center, Inc.)/(Banque
Paribas LOC) VMIG1 11,625,000
-------------------------------------------------------
3,875,000 Florida State Board of Education Capital Outlay, 3.50%
Semi-Annual TOBs (CR49D)/(Citibank BPA), Optional
Tender, 12/1/94 NR(2) 3,875,000
-------------------------------------------------------
3,790,000 Florida State Board of Education Capital Outlay, 3.50%
Semi-Annual TOBs (CR55D)/(Citibank BPA), Optional
Tender, 12/1/94 NR(2) 3,790,000
-------------------------------------------------------
3,000,000 Florida State Board of Education Capital Outlay, 3.55%
Semi-Annual TOBs (CR49)/(Series 1989A)/(Citibank BPA),
Optional Tender, 12/1/94 NR(2) 3,000,000
-------------------------------------------------------
2,900,000 Key West, FL, Community Redevelopment Authority Weekly
VRDNs (Pier House Joint Venture)/(PNC Bank N.A. LOC) P-1 2,900,000
-------------------------------------------------------
</TABLE>
5
TAX-FREE OBLIGATIONS FUND
- ---------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S OR
AMOUNT S&P* VALUE
- ---------- ------------------------------------------------------- ---------- -----------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
<C> <S> <C> <C>
- -------------------------------------------------------------------
FLORIDA--CONTINUED
-------------------------------------------------------
$1,815,000 Palm Beach County, FL, IDA Weekly VRDNs (Palm Jewish
Community Campus Corp.)/(Sun Bank N.A. LOC) A-1+ $ 1,815,000
-------------------------------------------------------
12,000,000 Saint Lucie County, FL, PCR, 3.20% CP, (Series 1992)/
(Florida Power & Light Co. Guaranty), Mandatory Tender,
1/24/95 A-1 12,000,000
-------------------------------------------------------
4,000,000 Saint Lucie County, FL, PCR, 3.20% CP, (Florida Power &
Light Co. Guaranty), Mandatory Tender, 12/15/94 A-1 4,000,000
-------------------------------------------------------
4,100,000 Sarasota County, FL, Public Hospital District, 3.25%
CP, (Sarasota Memorial Hospital Guaranty), Mandatory
Tender, 8/18/94 VM1G1 4,100,000
-------------------------------------------------------
5,000,000 Sunshine State Governmental Finance Commission, FL,
2.90% CP, (Morgan Guaranty Trust Co., National
Westminster Bank, PLC and Union Bank of Switzerland
LOCs), Mandatory Tender, 9/20/94 VMIG1 5,000,000
-------------------------------------------------------
11,100,000 Sunshine State Governmental Finance Commission, FL,
3.20% CP, (Morgan Guaranty Trust Co., National
Westminster Bank, PLC and Union Bank of Switzerland
LOCs), Mandatory Tender, 8/25/94 VMIG1 11,100,000
-------------------------------------------------------
2,000,000 University of Florida Athletic Association Weekly VRDNs
(University of Florida Stadium)/(Sun Bank N.A. LOC) VMIG1 2,000,000
-------------------------------------------------------
6,175,000 Volusia County, FL, HFA, Weekly VRDNs (Fisherman's
Landing)/(Mellon Bank N.A. LOC) P-1 6,175,000
-------------------------------------------------------
1,775,000 Volusia County, FL, IDA Weekly VRDNs (Crane Cams)/
(First Union National Bank LOC) P-1 1,775,000
------------------------------------------------------- -----------
Total 73,155,000
------------------------------------------------------- -----------
GEORGIA--1.5%
-------------------------------------------------------
6,730,000 DeKalb County, GA, Multi-Family Authority Weekly VRDNs
(Series 1985Q)/(Crow Wood Arbor Assoc. Ltd.)/ (Chemical
Bank LOC) A-1 6,730,000
-------------------------------------------------------
</TABLE>
6
TAX-FREE OBLIGATIONS FUND
- ---------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S OR
AMOUNT S&P* VALUE
- ---------- ------------------------------------------------------- ---------- -----------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
<C> <S> <C> <C>
- -------------------------------------------------------------------
GEORGIA--CONTINUED
-------------------------------------------------------
$1,600,000 DeKalb County, GA Weekly VRDNs (Series 1992)/ (American
Cancer Society GA Division)/(Trust Company Bank LOC) P-1 $ 1,600,000
-------------------------------------------------------
3,555,000 Georgia State HFA Single Family Mortgage Revenue, 3.45%
Semi-Annual TOBs, Optional Tender, 9/1/94 NR(2) 3,555,000
------------------------------------------------------- -----------
Total 11,885,000
------------------------------------------------------- -----------
ILLINOIS--2.4%
-------------------------------------------------------
3,000,000 Illinois Development Finance Authority Weekly VRDNs
(Newlywed Food)/(Mellon Bank N.A. LOC) A-1 3,000,000
-------------------------------------------------------
7,500,000 Illinois Educational Facilities Authority, 3.35% CP,
(Field Museum of History)/(Sanwa Bank Ltd. LOC),
Mandatory Tender, 9/9/94 VMIG1 7,500,000
-------------------------------------------------------
9,000,000 Illinois Health Facilities Authority Weekly VRDNS
(Sisters of the Third Order of St. Francis)/(Swiss Bank
Corp. LOC) A-1 9,000,000
------------------------------------------------------- -----------
Total 19,500,000
------------------------------------------------------- -----------
INDIANA--3.2%
-------------------------------------------------------
2,200,000 Bluffton, IN, Economic Development Refunding Revenue
Bonds Weekly VRDNs (Blount, Inc.)/(Credit Lyonnais,
Paris LOC) P-1 2,200,000
-------------------------------------------------------
1,245,000 Dale, IN, IDA Weekly VRDNs (Spencer Industries, Inc.)/
(First National Bank, Louisville LOC) P-1 1,245,000
-------------------------------------------------------
20,000,000 Indiana Bond Bank, 3.03% RANs (Series A2), 1/17/95 SP-1+ 20,025,164
-------------------------------------------------------
2,760,000 Indiana Health Facilities Finance Authority Weekly
VRDNs (Rehabilitation Center)/(Bank One, Indianapolis
N.A. LOC) A-1 2,760,000
------------------------------------------------------- -----------
Total 26,230,164
------------------------------------------------------- -----------
KANSAS--2.2%
-------------------------------------------------------
10,000,000 Burlington, KS, 3.10% CP, (Kansas City Power & Light
Co.)/(Toronto-Dominion Bank LOC), Mandatory Tender,
8/15/94 A-1+ 10,000,000
-------------------------------------------------------
</TABLE>
7
TAX-FREE OBLIGATIONS FUND
- ---------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S OR
AMOUNT S&P* VALUE
- ---------- ------------------------------------------------------- ---------- -----------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
<C> <S> <C> <C>
- -------------------------------------------------------------------
KANSAS--CONTINUED
-------------------------------------------------------
$7,400,000 Praire Village, KS, Weekly VRDNs (Series
1993B)/(Claridge Court)/(Banque Paribas LOC) A-1 $ 7,400,000
------------------------------------------------------- -----------
Total 17,400,000
------------------------------------------------------- -----------
KENTUCKY--0.2%
-------------------------------------------------------
1,650,000 Boone County, KY, Weekly VRDNs (Spring Meadow
Associates)/(Huntington National Bank LOC) P-1 1,650,000
------------------------------------------------------- -----------
LOUISIANA--3.2%
-------------------------------------------------------
11,000,000 Louisiana PFA Hospital Revenue, 2.85%-3.20% CP, (Our
Lady of Lake Hospital)/(FSA Insured), Mandatory Tender,
9/22/94 A-1 11,000,000
-------------------------------------------------------
2,000,000 Louisiana PFA Hospital Revenue, 3.35% CP, (Our Lady of
Lake Hospital)/(FSA Insured), Mandatory Tender, 8/18/94 A-1 2,000,000
-------------------------------------------------------
6,300,000 Louisiana PFA, 2.95% CP, (Our Lady of Lake Hospital)/
(FSA Insured), Mandatory Tender, 9/20/94 A-1 6,300,000
-------------------------------------------------------
7,000,000 Louisiana PFA, 3.25% Annual TOBs (Series C)/(Orleans
Parish School Board Guaranty), 8/12/94 SP-1+ 7,000,825
------------------------------------------------------- -----------
Total 26,300,825
------------------------------------------------------- -----------
MARYLAND--1.3%
-------------------------------------------------------
1,600,000 Maryland State Department of Transportation PA-68
Weekly VRDNs (Series 1993) VMIG1 1,600,000
-------------------------------------------------------
2,000,000 Maryland State HEFA Weekly VRDNs (Series 1985B)/
(Pooled Loan Program)/(Sanwa Bank Ltd. LOC) VMIG1 2,000,000
-------------------------------------------------------
4,000,000 Maryland State HEFA Weekly VRDNs (Series 1985A)/
(Dai-Ichi Kangyo Bank Ltd. LOC) VMIG1 4,000,000
-------------------------------------------------------
2,200,000 Maryland State Weekly VRDNs (Series 1993)/(Dai-Ichi
Kangyo Bank Ltd. BPA) A-1 2,200,000
-------------------------------------------------------
1,000,000 Montgomery County, MD, EDA Weekly VRDNs (Howard Hughes
Medical Institute Guaranty) A-1+ 1,000,000
------------------------------------------------------- -----------
Total 10,800,000
------------------------------------------------------- -----------
</TABLE>
8
TAX-FREE OBLIGATIONS FUND
- ---------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S OR
AMOUNT S&P* VALUE
- ---------- ------------------------------------------------------- ---------- -----------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
<C> <S> <C> <C>
- -------------------------------------------------------------------
MINNESOTA--10.4%
-------------------------------------------------------
$2,050,000 Anoka, MN, Multi-Family Housing Revenue Bonds Weekly
VRDNs (Walker Plaza)/(First Bank, N.A. LOC) A-1 $ 2,050,000
-------------------------------------------------------
6,900,000 Bloomington, MN, ISD #271, 3.00% TANs (State of
Minnesota Guaranty), 3/8/95 NR(2) 6,915,188
-------------------------------------------------------
2,165,000 Dakota County, MN, Housing and Redevelopment Authority,
Multi-Family Rental Housing Revenue Bonds Weekly VRDNs
(Series 1994B)/(Westwood Ridge Senior Residence)/(First
Bank, N.A. LOC) A-1 2,165,000
-------------------------------------------------------
10,000,000 Minneapolis, MN, Weekly VRDNs (Series 1993)/
(Commercial Development)/(Market Square Real Estate,
Inc.)/(Norwest Bank of Minnesota LOC) A-1+ 10,000,000
-------------------------------------------------------
6,000,000 Minnesota State Commissioner of Iron Range Resources &
Rehabilitation Weekly VRDNs (Series 1991)/(Louisiana
Pacific Corp.)/(Wachovia Bank & Trust Co. LOC) P-1 6,000,000
-------------------------------------------------------
4,300,000 Minnesota State Higher Education Facility Authority
Weekly VRDNs (Carlton College Guaranty) VMIG1 4,300,000
-------------------------------------------------------
5,870,000 Minnesota State Higher Education Facility Authority
Weekly VRDNs (Supplemental Student Loan Program)/
(Mitsubishi Bank Ltd. LOC) VMIG1 5,870,000
-------------------------------------------------------
3,600,000 Minnetonka, MN, Multi-Family Housing Revenue Bonds
Weekly VRDNs (Cliffs at Ridgedale)/(Citibank, N.A. LOC) A-1 3,600,000
-------------------------------------------------------
9,000,000 Mounds View, MN, ISD #621, 3.00% TANS (Series 1994A)/
(State of Minnesota Guaranty), 3/15/95 NR(2) 9,016,303
-------------------------------------------------------
4,000,000 Olmsted County, MN, COPs, Building Authority Weekly
VRDNs (Human Services Infrastructure)/(Sanwa Bank Ltd.
LOC) A-1+ 4,000,000
-------------------------------------------------------
5,000,000 Rochester, MN, Health Care Facility Authority Weekly
VRDNs (Mayo Clinic Foundation Guaranty) VMIG1 5,000,000
-------------------------------------------------------
15,000,000 Rochester, MN, Health Care Facility Authority Weekly
VRDNs (Mayo Clinic Foundation Guaranty) VMIG1 15,000,000
-------------------------------------------------------
</TABLE>
9
TAX-FREE OBLIGATIONS FUND
- ---------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S OR
AMOUNT S&P* VALUE
- ---------- ------------------------------------------------------- ---------- -----------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
<C> <S> <C> <C>
- -------------------------------------------------------------------
MINNESOTA--CONTINUED
-------------------------------------------------------
$4,000,000 Rosemount, MN, PCR Weekly VRDNs (Series 1984)/(Koch
Refining Co. Guaranty) A-1+ $ 4,000,000
-------------------------------------------------------
800,000 Saint Paul Port Authority, MN, Tax Increment Weekly
VRDNs (Series 1991)/(First Bank N.A. LOC) A-1 800,000
-------------------------------------------------------
6,000,000 University of Minnesota, 3.20% CP, (Series H)/(Regents
of University of Minnesota Guaranty), Mandatory Tender,
8/26/94 A-1+ 6,000,000
------------------------------------------------------- -----------
Total 84,716,491
------------------------------------------------------- -----------
MISSISSIPPI--0.2%
-------------------------------------------------------
1,845,000 Hinds County, MS, Urban Renewal Refunding Weekly VRDNs
(Series 1991)/(North State Street)/(AmSouth Bank N.A.
LOC) VMIG1 1,845,000
------------------------------------------------------- -----------
MISSOURI--0.8%
-------------------------------------------------------
2,500,000 Missouri State HEFA Daily VRDNs (Washington
University)/(Morgan Guranty Trust Co. BPA) A-1+ 2,500,000
-------------------------------------------------------
4,200,000 Poplar Bluff, MO, IDA Weekly VRDNs (Series 1987)/(Gates
Rubber Co.)/(National Bank of Detroit LOC) A-1+ 4,200,000
------------------------------------------------------- -----------
Total 6,700,000
------------------------------------------------------- -----------
MONTANA--0.8%
-------------------------------------------------------
6,500,000 Forsyth, Rosebud County, MT, 3.15% CP, (Pacificorp,
Inc.)/ (Industrial Bank of Japan Ltd. LOC), Mandatory
Tender, 9/21/94 A-1 6,500,000
------------------------------------------------------- -----------
NEVADA--0.4%
-------------------------------------------------------
3,000,000 Director of the State of Nevada, 2.90% Annual TOBs (FMC
Corp.)/(Barclays Bank PLC LOC), Optional Tender,
9/15/94 VMIG1 3,000,000
------------------------------------------------------- -----------
NEW YORK--1.0%
-------------------------------------------------------
5,900,000 New York City, NY, Daily VRDNs GO Bonds (Fiscal 1991)/
(Morgan Guaranty Trust Co. and Industrial Banks of
Japan Ltd. LOCs) A-1 5,900,000
-------------------------------------------------------
</TABLE>
10
TAX-FREE OBLIGATIONS FUND
- ---------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S OR
AMOUNT S&P* VALUE
- ---------- ------------------------------------------------------- ---------- -----------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
<C> <S> <C> <C>
- -------------------------------------------------------------------
NEW YORK--CONTINUED
-------------------------------------------------------
$2,000,000 Niagara County, NY, IDA Weekly VRDNs (Allegheny Ludlum
Steel Corp.)/(PNC Bank N.A. LOC) A-1 $ 2,000,000
------------------------------------------------------- -----------
Total 7,900,000
------------------------------------------------------- -----------
NORTH CAROLINA--4.9%
-------------------------------------------------------
7,377,877 Charlotte, NC, Weekly VRDNs, Floating Rate Trust
Certificate (Series 1992)/(Credit Suisse Financial
Products BPA) P-1 7,377,877
-------------------------------------------------------
15,000,000 Martin County, NC, IFA, Weekly VRDNs (Series 1993)/
(Weyerhauser, Inc. Guaranty) A-1 15,000,000
-------------------------------------------------------
1,400,000 NCNB Pooled Tax-Exempt Trust Weekly VRDNs (Series
1990A)/(NationsBank of North Carolina N.A. LOC) P-1 1,400,000
-------------------------------------------------------
16,000,000 North Carolina Municipal Power Agency #1, 3.30% CP,
(Catawba Electric), Mandatory Tender, 10/20/94 A-1 16,000,000
------------------------------------------------------- -----------
Total 39,777,877
------------------------------------------------------- -----------
OHIO--12.2%
-------------------------------------------------------
2,850,000 Akron, OH, Bath & Copley Joint Township Hospital Weekly
VRDNs (Visiting Nurses)/(National City Bank, Cleveland
LOC) A-1 2,850,000
-------------------------------------------------------
2,630,000 Ashland County, OH, Health Care Weekly VRDNs (Bethren
Care, Inc.)/(National City Bank, Cleveland LOC) P-1 2,630,000
-------------------------------------------------------
2,000,000 Columbus, OH, Sewer System Revenue Bonds Weekly VRDNs
(Series 1994) VMIG1 2,000,000
-------------------------------------------------------
1,100,000 Cuyahoga County, OH, Hospital Authority Weekly VRDNs
(St. Luke's Hospital)/(First National Bank of Chicago
LOC) VMIG1 1,100,000
-------------------------------------------------------
2,750,000 Cuyahoga County, OH, IDA Weekly VRDNs (H.P. Parking
Co.)/(Society National Bank LOC) P-1 2,750,000
-------------------------------------------------------
2,000,000 Dayton, OH, Weekly VRDNs (Series 1993E)/(Emery Air
Freight Corp.)/(Mellon Bank N.A. LOC) VMIG1 2,000,000
-------------------------------------------------------
</TABLE>
11
TAX-FREE OBLIGATIONS FUND
- ---------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S OR
AMOUNT S&P* VALUE
- ---------- ------------------------------------------------------- ---------- -----------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
<C> <S> <C> <C>
- -------------------------------------------------------------------
OHIO--CONTINUED
-------------------------------------------------------
$10,400,000 Franklin County, OH, Hospital Facility Authority Weekly
VRDNs (St. Anthony's Hospital)/(National City Bank,
Cleveland LOC) VMIG1 $10,400,000
-------------------------------------------------------
9,100,000 Franklin County, OH, Weekly VRDNs (Series 1992)/
(Rickenbacker Holdings, Inc.)/(Bank One, Columbus N.A.
LOC) P-1 9,100,000
-------------------------------------------------------
7,550,000 Hamilton County, OH, Health Care System Weekly VRDNs
(West Park Retirement Community, Inc)/(Fifth Third Bank
LOC) VMIG1 7,550,000
-------------------------------------------------------
11,000,000 Hamilton County, OH, Hospital Authority Revenue Bonds
Weekly VRDNs (Series 1986A)/(Good Samaritan Hospital
Guaranty) A-1 11,000,000
-------------------------------------------------------
2,650,000 Kettering, OH, IDA Weekly VRDNs (Center-Plex Venture,
Inc.)/(Society National Bank LOC) P-1 2,650,000
-------------------------------------------------------
2,885,000 Lorain County, OH, Hospital Facilities Weekly VRDNs
(Series 1992A)/(Elyria Methodist Hospital)/(Fifth Third
Bank LOC) P-1 2,885,000
-------------------------------------------------------
325,000 Lucas County, OH, Health Care Improvement Weekly VRDNs
(Sunshine Children's Home)/(National City Bank,
Cleveland LOC) P-1 325,000
-------------------------------------------------------
4,500,000 Lucas County, OH, HFA Weekly VRDNs (Riverside
Hospital)/(Huntington National Bank LOC) P-1 4,500,000
-------------------------------------------------------
2,000,000 Lucas County, OH, Weekly VRDNs (Series 1991)/(Ohio
Citizens Bank)/(National City Bank, Cleveland LOC) P-1 2,000,000
-------------------------------------------------------
2,395,000 Marion City, OH, Hospital Authority, 3.25% Semi-Annual
TOBs (Series 1991)/(Pooled Lease Program)/(Bank One,
Columbus N.A. LOC), Optional Tender, 11/1/94 A-1+ 2,395,000
-------------------------------------------------------
5,000,000 Mayfield Village, OH, IDA, Weekly VRDNs (Beta Campus
Co.)/(Society National Bank LOC) P-1 5,000,000
-------------------------------------------------------
1,730,000 Montgomery County, OH, IDA Weekly VRDNs (Bethesda Two
Ltd. Partnership)/(Huntington National Bank LOC) P-1 1,730,000
-------------------------------------------------------
</TABLE>
12
TAX-FREE OBLIGATIONS FUND
- ---------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S OR
AMOUNT S&P* VALUE
- ---------- ------------------------------------------------------- ---------- -----------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
<C> <S> <C> <C>
- -------------------------------------------------------------------
OHIO--CONTINUED
-------------------------------------------------------
$ 850,000 Montgomery County, OH, IDA Weekly VRDNs (Center-Plex
Venture, Inc.)/(Society National Bank LOC) P-1 $ 850,000
-------------------------------------------------------
4,800,000 Muskingham County, OH, Hospital Facilities Authority
Weekly VRDNs (Bethesda Care Systems)/(BancOhio National
Bank LOC) VMIG1 4,800,000
-------------------------------------------------------
1,000,000 Ohio State Air Quality Development Authority Weekly
VRDNs (Timkin Co.)/(Credit Suisse LOC) A-1+ 1,000,000
-------------------------------------------------------
6,000,000 Ohio State Water Development Authority, Pure Water
Refunding & Improvement Bonds Weekly VRDNs (Series
PA-56)/(AMBAC Insured) VMIG1 6,000,000
-------------------------------------------------------
5,000,000 Ohio State Water Development Authority, 3.10% CP
(Series A)/(Cleveland Electric Illuminating Co.)/(FGIC
Insured), Mandatory Tender, 9/21/94 A-1+ 5,000,000
-------------------------------------------------------
5,000,000 Richland County, OH, 2.96% GO BANs, 9/15/94 NR(3) 5,001,264
-------------------------------------------------------
2,000,000 Seneca County, OH, Hospital Facility Weekly VRDNs (St.
Francis Home)/(National City Bank, Cleveland LOC) VMIG1 2,000,000
-------------------------------------------------------
850,000 Solon, OH, IDA Weekly VRDNs (Solon Industries)/(Society
National Bank LOC) P-1 850,000
-------------------------------------------------------
1,150,000 Twinsburg, OH, IDA Weekly VRDNs (Carl Massara)/
(Society National Bank LOC) P-1 1,150,000
------------------------------------------------------- -----------
Total 99,516,264
------------------------------------------------------- -----------
OKLAHOMA--0.4%
-------------------------------------------------------
3,330,000 Oklahoma County, OK, Industrial Authority Retirement
Center, 2.90% Semi-Annual TOBs (Series 1989)/(Baptist
General Convention)/(Sumitomo Bank Ltd. LOC), Mandatory
Tender, 9/1/94 VMIG1 3,330,000
------------------------------------------------------- -----------
</TABLE>
13
TAX-FREE OBLIGATIONS FUND
- ---------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S OR
AMOUNT S&P* VALUE
- ---------- ------------------------------------------------------- ---------- -----------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
<C> <S> <C> <C>
- -------------------------------------------------------------------
PENNSYLVANIA--5.6%
-------------------------------------------------------
$7,000,000 Allegheny County, PA, IDA, Pollution Control Revenue
Bonds, 3.45% Semi-Annual TOBs (Series 1992A)/(Duquesne
Light Co.)/(Canadian Imperial Bank of Commerce LOC),
Mandatory Tender, 1/18/95 P-1 $ 7,000,000
-------------------------------------------------------
6,000,000 Delaware County, PA, PCA, 3.15% CP, (Series C)/
(Philadelphia Electric Company)/(FGIC Insured),
Mandatory Tender, 9/22/94 A-1+ 6,000,000
-------------------------------------------------------
4,700,000 Delaware County, PA, Weekly VRDNs (The American
College)/(Provident National Bank LOC) P-1 4,700,000
-------------------------------------------------------
3,900,000 East Hempfield Township, PA, IDA Weekly VRDNs (Series
1985)/(Yellow Freight System, Inc.)/(Wachovia Bank &
Trust Co. N.A. LOC) A-1 3,900,000
-------------------------------------------------------
11,900,000 Erie County, PA, Hospital Authority Weekly VRDNs (St.
Vincent Health System)/(Fuji Bank Ltd. LOC) A-1 11,900,000
-------------------------------------------------------
1,000,000 Pennsylvania Higher Education Facilities Authority
Daily VRDNs (Temple University)/(Morgan Guaranty Trust
Co. LOC) A-1+ 1,000,000
-------------------------------------------------------
1,800,000 Pennsylvania Higher Education Facilities Authority
Weekly VRDNs (Carnegie Mellon University Guaranty) A+ 1,800,000
-------------------------------------------------------
5,000,000 Philadelphia, PA, Gas Works Revenue Notes, 2.80% CP,
(Series B)/(Canadian Imperial Bank of Commerce LOC),
Mandatory Tender, 10/19/94 A-1+ 5,000,000
-------------------------------------------------------
1,300,000 Quakertown, PA, Weekly VRDNs (Hapsco Group)/(First
National Bank, Chicago LOC) VMIG1 1,300,000
-------------------------------------------------------
2,600,000 Sayre, PA, Health Care Facilities Authority Hospital
Weekly VRDNs (Series C)/(VHA of Pennsylvania Capital
Asset Finance Program)/(AMBAC Insured) A-1 2,600,000
-------------------------------------------------------
500,000 Sayre, PA, Health Care Facilities Authority Weekly
VRDNs (VHA of Pennsylvania Capital Asset
Program)/(AMBAC Insured) A-1 500,000
------------------------------------------------------- -----------
Total 45,700,000
------------------------------------------------------- -----------
</TABLE>
14
TAX-FREE OBLIGATIONS FUND
- ---------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S OR
AMOUNT S&P* VALUE
- ---------- ------------------------------------------------------- ---------- -----------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
<C> <S> <C> <C>
- -------------------------------------------------------------------
PUERTO RICO--0.2%
-------------------------------------------------------
$1,600,000 Government Development Bank of Puerto Rico Weekly VRDNs
(Credit Suisse and Sumitomo Bank Ltd. LOCs) A-1 $ 1,600,000
------------------------------------------------------- -----------
TENNESSEE--4.6%
-------------------------------------------------------
8,500,000 Chattanooga, TN, HEFA Weekly VRDNs (Siskin Hospital for
Physical Rehabilitation, Inc.)/(Sumitomo Bank Ltd. LOC) A-1 8,500,000
-------------------------------------------------------
1,700,000 Chattanooga-Hamilton County, TN, Hospital Authority
Daily VRDNs (Erlanger Medical Center Guaranty)/(Morgan
Guaranty Trust Co. LOC) A-1+ 1,700,000
-------------------------------------------------------
10,000,000 Clarksville, TN, Public Building Authority, Pooled
Finance Weekly VRDNs, (Series 1994)/(Tennessee
Municipal Bond Fund)/(NationsBank of Tennessee LOC) A-1 10,000,000
-------------------------------------------------------
1,000,000 Jackson County, TN, IDB, Daily VRDNs (Series
B)/(Esselte Co.)/(Morgan Guaranty Trust Co. LOC) A-1+ 1,000,000
-------------------------------------------------------
16,400,000 Tennessee State, Weekly VRDNs (Series 1994A) A-1+ 16,400,000
------------------------------------------------------- -----------
Total 37,600,000
------------------------------------------------------- -----------
TEXAS--11.2%
-------------------------------------------------------
8,000,000 Harris County, TX, 4.00% TANs (Series 1994), 2/28/95 SP-1+ 8,015,324
-------------------------------------------------------
4,200,000 Harris County, TX, HFDC Daily (Series B)/(St. Luke's
Episcopal Hospital Guaranty) A-1+ 4,200,000
-------------------------------------------------------
7,000,000 Harris County, TX, HFDC Daily VRDNs (Series D)/(St.
Luke's Episcopal Hospital Guaranty A-1+ 7,000,000
-------------------------------------------------------
4,500,000 Harris County, TX, School Health Care, 3.10% CP,
(Sisters of Charity of the Incarnate Word Guaranty),
Mandatory Tender, 10/14/94 A-1+ 4,500,000
-------------------------------------------------------
15,000,000 Houston, TX, HFDC Daily VRDNs (Methodist Hospital
Guaranty) A-1+ 15,000,000
-------------------------------------------------------
2,020,000 North Richland Hills, TX, IDC Weekly VRDNs (Technol,
Inc.)/(NationsBank of North Carolina N.A. LOC) P-1 2,020,000
-------------------------------------------------------
</TABLE>
15
TAX-FREE OBLIGATIONS FUND
- ---------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S OR
AMOUNT S&P* VALUE
- ---------- ------------------------------------------------------- ---------- -----------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
<C> <S> <C> <C>
- -------------------------------------------------------------------
TEXAS--CONTINUED
-------------------------------------------------------
$12,000,000 Texas State Public Finance Authority GO Bonds, 3.50%
Semi-Annual TOBs (Series 1994A), Optional Tender,
10/4/94 A-1+ $12,000,000
-------------------------------------------------------
10,000,000 Texas State Public Finance Authority, 2.50% CP, (Series
1993A), Mandatory Tender, 10/27/94 A-1+ 10,000,000
-------------------------------------------------------
10,000,000 Texas State Public Finance Authority, 3.25% CP, (Series
1993A), Mandatory Tender, 11/22/94 A-1+ 10,000,000
-------------------------------------------------------
16,000,000 Texas State, 3.25% TRANs (Series 1993), 8/31/94 SP-1+ 16,006,072
-------------------------------------------------------
2,800,000 Texas Water Development Board Daily VRDNs (Series A)/
(Capital Asset Program)/(Canadian Imperial Bank of
Commerce LOC) A-1+ 2,800,000
------------------------------------------------------- -----------
Total 91,541,396
------------------------------------------------------- -----------
UTAH--1.1%
-------------------------------------------------------
3,000,000 Davis County, UT, 3.75% TANs, 12/30/94 NR(2) 3,007,915
-------------------------------------------------------
2,000,000 Intermountain Power Agency, UT, 3.00% Semi-Annual TOBs,
Optional Tender, 9/15/94 A-1 2,000,000
-------------------------------------------------------
2,400,000 Utah County, UT, 3.45% TRANs (Series 1994), 12/30/94 NR(2) 2,400,000
-------------------------------------------------------
1,500,000 Weber County, UT, 3.87% TRANs (Series 1994A), 12/30/94 NR(3) 1,502,566
------------------------------------------------------- -----------
Total 8,910,481
------------------------------------------------------- -----------
VIRGINIA--2.3%
-------------------------------------------------------
10,500,000 Arlington County, VA, Weekly VRDNs (Ballston Public
Parking)/(Citibank N.A. LOC) A-1 10,500,000
-------------------------------------------------------
5,000,000 Henrico County, VA, IDA Daily VRDNs (Series 1994)/
(Virginia United Methodist Homes, Inc.)/(Nationsbank of
Virginia N.A. LOC) VMIG1 5,000,000
-------------------------------------------------------
3,140,000 Virginia Beach, VA, Development Authority Weekly VRDNs
(GSC Diamond Associates)/(Sovran Bank N.A. LOC) P-1 3,140,000
------------------------------------------------------- -----------
Total 18,640,000
------------------------------------------------------- -----------
</TABLE>
16
TAX-FREE OBLIGATIONS FUND
- ---------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S OR
AMOUNT S&P* VALUE
- ---------- ------------------------------------------------------- ---------- -----------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
<C> <S> <C> <C>
- -------------------------------------------------------------------
WASHINGTON--2.5%
-------------------------------------------------------
$10,000,000 Washington State, 3.65% GO Semi-Annual TOBs (Series
HH-2 & 1994B)/(Bayerische Hypotheken-Wechsel-Bank AG
BPA), Optional Tender, 11/2/94 A-1+ $10,000,000
-------------------------------------------------------
10,000,000 Washington State, Weekly VRDNs (Series 1994A)/(Dai-Ichi
Kangyo Bank BPA) A-1 10,000,000
------------------------------------------------------- -----------
Total 20,000,000
------------------------------------------------------- -----------
WISCONSIN--0.1%
-------------------------------------------------------
1,100,000 Seymour, WI, IDA Weekly VRDNs (Beatrice Cheese, Inc.)/
(Bank of New York LOC) P-1 1,100,000
------------------------------------------------------- -----------
WYOMING--0.1%
-------------------------------------------------------
1,125,000 Natrona County, WY Hospital Revenue, 4.71% CP, (W.W.
Grainger, Inc. Guaranty), Mandatory Tender, 12/1/94 A-1 1,125,000
------------------------------------------------------- -----------
Total 777,762,874
------------------------------------------------------- -----------
OTHER--4.1%
-------------------------------------------------------
10,000,000 Clipper Tax Exempt Trust, Weekly VRDNs (Series 1993-1)/
(State Street Bank BPA) A-1+ 10,000,000
-------------------------------------------------------
4,198,584 LaSalle National Bank Bustops Trust Weekly VRDNs
(Series 1993A)/(LaSalle National Bank BPA) A-1+ 4,198,584
-------------------------------------------------------
9,437,890 LaSalle National Bank LeaseTops Trust Weekly VRDNs
(Series 1994B)/(LaSalle National Bank BPA) A-1+ 9,437,890
-------------------------------------------------------
9,600,000 Merrill Lynch Puttable Floats/Rites Trust (Series PP2)
Weekly VRDNs (Merrill Lynch Capital Services BPA) VMIG1 9,600,000
------------------------------------------------------- -----------
Total 33,236,474
------------------------------------------------------- -----------
TOTAL INVESTMENTS, AT AMORTIZED COST (NOTE 2A) $810,999,348+
------------------------------------------------------- -----------
<FN>
+ Also represents cost for federal tax purposes.
* Please refer to the Appendix of the Statement of Additional Information
for an explanation of the credit ratings. Current credit ratings are
unaudited.
Note: The categories of investments are shown as a percentage of net assets
($814,903,051) at July 31, 1994.
</TABLE>
17
TAX-FREE OBLIGATIONS FUND
- ---------------------------------------------------------
The following abbreviations are used in this portfolio:
<TABLE>
<S> <C>
AMBAC --American Municipal Bond Assurance Corporation
BANs --Bond Anticipation Notes
BPA --Bond Purchase Agreement
COPs --Certificates of Participation
CP --Commercial Paper
EDA --Economic Development Authority
FGIC --Financial Guaranty Insurance Co.
FRDNs --Floating Rate Demand Note
FSA --Financial Security Assurance
GO --General Obligation
HEFA --Health and Education Facilities Authority
HFA --Housing Finance Authority
HFDC --Health Facility Development Authority
IDA --Industrial Development Authority
IDB --Industrial Development Bond
IDC --Industrial Development Corporation
IFA --Industrial Finance Authority
ISD --Independent School District
LOC --Letter of Credit
MBIA --Municipal Bond Investors Assurance
PCA --Pollution Control Authority
PCR --Pollution Control Revenue
PFA --Public Facility Authority
PLC --Public Limited Company
RANs --Revenue Anticipation Notes
TANs --Tax Anticipation Notes
TOBs --Tender Option Bonds
TRANs --Tax Revenue Anticipation Notes
VHA --Voluntary Hospitals of America
VRDNs --Variable Rate Demand Notes
</TABLE>
(The accompanying Notes are an integral part of the financial statements)
18
TAX-FREE OBLIGATIONS FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments, at amortized cost and value (Note 2A) $810,999,348
- --------------------------------------------------------------------------------
Cash 1,337,737
- --------------------------------------------------------------------------------
Interest receivable 4,375,607
- --------------------------------------------------------------------------------
Deferred expenses (Note 2E) 2,669
- -------------------------------------------------------------------------------- ------------
Total assets 816,715,361
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Dividends payable $1,654,664
- ----------------------------------------------------------------------
Accrued expenses 157,646
- ---------------------------------------------------------------------- ----------
</TABLE>
<TABLE>
<S> <C>
Total liabilities 1,812,310
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 814,922,891 shares of beneficial interest outstanding $814,903,051
- -------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid-in Capital $814,922,891
- --------------------------------------------------------------------------------
Accumulated net realized loss on investments (19,840)
- -------------------------------------------------------------------------------- ------------
Total $814,903,051
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
- --------------------------------------------------------------------------------
Institutional Shares ($789,754,615 DIVIDED BY 789,774,455 shares of beneficial
interest outstanding) $ 1.00
- -------------------------------------------------------------------------------- ------------
Institutional Service Shares ($25,148,436 DIVIDED BY 25,148,436 shares of
beneficial interest outstanding) $ 1.00
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
19
TAX-FREE OBLIGATIONS FUND
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------
Interest income (Note 2B) $18,201,027
- -------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------
Investment advisory fee* $1,392,414
- ------------------------------------------------------------
Trustees' fees 4,373
- ------------------------------------------------------------
Administrative personnel and services fees* 493,607
- ------------------------------------------------------------
Custodian fees 78,093
- ------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses* 21,584
- ------------------------------------------------------------
Fund share registration costs 141,984
- ------------------------------------------------------------
Auditing fees 13,145
- ------------------------------------------------------------
Legal fees 6,083
- ------------------------------------------------------------
Printing and postage 13,079
- ------------------------------------------------------------
Portfolio accounting fees* 95,018
- ------------------------------------------------------------
Insurance premiums 11,800
- ------------------------------------------------------------
Shareholder services fee--Institutional Shares* 129,351
- ------------------------------------------------------------
Shareholder services fee--Institutional Service Shares* 1,491
- ------------------------------------------------------------
Miscellaneous 5,942
- ------------------------------------------------------------ ----------
Total expenses 2,407,964
- ------------------------------------------------------------
Deduct--Waiver of investment advisory fee* 1,014,059
- ------------------------------------------------------------ ----------
Net expenses 1,393,905
- ------------------------------------------------------------------------- -----------
Net investment income 16,807,122
- ------------------------------------------------------------------------- -----------
Net realized gain on investments 3,986
- ------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $16,811,108
- ------------------------------------------------------------------------- -----------
<FN>
* (See Note 4)
(See Notes which are an integral part of the Financial Statements)
</TABLE>
20
TAX-FREE OBLIGATIONS FUND
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------
1994 1993
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------
Net investment income $ 16,807,122 $ 10,222,200
- ---------------------------------------------------------------------------
Net realized gain (loss) on investments ($19,220 net loss and $620 net
loss, respectively, as computed for federal tax purposes) 3,986 (23,826)
- --------------------------------------------------------------------------- ------------- -------------
Change in net assets resulting from operations 16,811,108 10,198,374
- --------------------------------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2B)--
- ---------------------------------------------------------------------------
Dividends to shareholders from net investment income
- ---------------------------------------------------------------------------
Institutional Shares (16,783,291) (10,222,200)
- ---------------------------------------------------------------------------
Institutional Service Shares (23,831) --
- --------------------------------------------------------------------------- ------------- -------------
Change in net assets from distributions to shareholders (16,807,122) (10,222,200)
- --------------------------------------------------------------------------- ------------- -------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ---------------------------------------------------------------------------
Proceeds from sale of shares 3,346,441,976 1,565,436,002
- ---------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends
declared 460,949 8,569
- ---------------------------------------------------------------------------
Cost of shares redeemed (2,986,122,657) (1,420,156,576)
- --------------------------------------------------------------------------- ------------- -------------
Change in net assets from Fund share transactions 360,780,268 145,287,995
- --------------------------------------------------------------------------- ------------- -------------
Change in net assets 360,784,254 145,264,169
- ---------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------
Beginning of period 454,118,797 308,854,628
- --------------------------------------------------------------------------- ------------- -------------
End of period $ 814,903,051 $ 454,118,797
- --------------------------------------------------------------------------- ------------- -------------
<FN>
(See Notes which are an integral part of the Financial Statements)
</TABLE>
21
TAX-FREE OBLIGATIONS FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------------------------------
1994 1993 1992 1991 1990*
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.02 0.03 0.04 0.05 0.04
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.02) (0.03) (0.04) (0.05) (0.04)
- ---------------------------------------------------------------------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------- --------- --------- --------- --------- ---------
TOTAL RETURN** 2.45% 2.54% 3.73% 5.13% 3.70%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 0.20% 0.20% 0.20% 0.20% 0.20%(b)
- ----------------------------------------------------------------------
Net investment income 2.41% 2.49% 3.58% 4.93% 5.75%(b)
- ----------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.15% 0.14% 0.17% 0.26% 0.21%(b)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period
(000 omitted) $ 789,755 $ 454,119 $ 308,855 $ 165,669 $ 145,552
- ----------------------------------------------------------------------
<FN>
* Reflects operations for the period from December 12, 1989 (date of initial
public investment) to July 31, 1990.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(b) Computed on an annualized basis
</TABLE>
(See Notes which are an integral part of the Financial Statements)
22
TAX-FREE OBLIGATIONS FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
JULY 31, 1994*
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.002
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.002)
- ---------------------------------------------------------------------- --------------
NET ASSET VALUE, END OF PERIOD $ 1.00
- ---------------------------------------------------------------------- --------------
TOTAL RETURN** 0.18%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 0.39%(b)
- ----------------------------------------------------------------------
Net investment income 3.04%(b)
- ----------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.15%(b)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $25,148
- ----------------------------------------------------------------------
<FN>
* Reflects operations for the period from July 5, 1994 (date of initial
public offering) to July 31, 1994.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(b) Computed on an annualized basis
</TABLE>
(See Notes which are an integral part of the Financial Statements)
23
TAX-FREE OBLIGATIONS FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Money Market Obligations Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end, management
investment company. The Trust consists of five diversified portfolios. The
financial statements included herein are only those of Tax-Free Obligations Fund
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held. Effective July 5,
1994, (the effective date for Institutional Service Shares) the Fund provides
two classes of shares ("Institutional Shares" and "Institutional Service
Shares").
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
B. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
C. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its tax-exempt income.
Accordingly, no provisions for federal tax are necessary.
At July 31, 1994, the Fund for federal tax purposes, had a capital loss
carryforward of $19,840, which will reduce the Fund's taxable income arising
from future net realized gain on investment, if any, to the extent permitted
by the Code, and thus will reduce the amount of the distributions to
shareholders which would otherwise be necessary to relieve the Fund of any
liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire in 2001 ($620), and 2002 ($19,220).
D. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
24
TAX-FREE OBLIGATIONS FUND
- ---------------------------------------------------------
E. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
F. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At July 31, 1994, capital paid-in aggregated $814,922,891.
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
--------------------------------
INSTITUTIONAL SHARES 1994 1993
- ---------------------------------------------------------------------- --------------- ---------------
<S> <C> <C>
Shares sold 3,312,845,513 1,565,436,002
- ----------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 460,949 8,569
- ----------------------------------------------------------------------
Shares redeemed (2,977,674,630) (1,420,156,576)
- ---------------------------------------------------------------------- --------------- ---------------
Net change resulting from Institutional Shares transactions 335,631,832 145,287,995
- ---------------------------------------------------------------------- --------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JULY
31,
---------------
INSTITUTIONAL SERVICE SHARES 1994*
- ---------------------------------------------------------------------- ---------------
<S> <C>
Shares sold 33,596,463
- ----------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared --
- ----------------------------------------------------------------------
Shares redeemed (8,448,027)
- ---------------------------------------------------------------------- ---------------
Net change resulting from Institutional Service Shares transactions 25,148,436
- ---------------------------------------------------------------------- ---------------
Net change resulting from Fund share transactions 360,780,268
- ---------------------------------------------------------------------- ---------------
<FN>
* For the period from July 5, 1994 (date of initial public offering) to July 31,
1994.
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 0.20 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver, at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
administrative personnel and services. Prior to March 1, 1994, these services
were provided at approximate cost. Effective March 1, 1994, the FAS fee is based
on the level of average aggregate daily net assets of all
25
TAX-FREE OBLIGATIONS FUND
- ---------------------------------------------------------
funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25 of
1% of average net assets of the Fund for the period. This fee is to obtain
certain personal services for shareholders and to maintain the shareholder
accounts.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND ACCOUNTING FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The FServ fee is based on the size, type and numbers of accounts and
transactions made by shareholders.
FServ also maintains the Fund's accounting records. The fee is based on the
level of the Fund's average net assets for the period plus, out-of-pocket
expenses.
INTERFUND TRANSACTIONS--During the year ended July 31, 1994, the Fund engaged in
purchase and sale transactions with other affiliated funds pursuant to Rule
17a-7 of the Act amounting to $1,069,262,300 and $980,035,000, respectively.
These purchases and sales were conducted on an arms length basis and transacted
for cash consideration only, at independent current market prices and without
brokerage commissions, fees or other remuneration.
Certain of the Officers and Trustees of the Fund are Officers and Directors or
Trustees of the above companies.
26
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- ---------------------------------------------------------
To the Shareholders and Board of Trustees of
MONEY MARKET OBLIGATIONS TRUST
(TAX-FREE OBLIGATIONS FUND):
We have audited the accompanying statement of assets and liabilities of Tax-Free
Obligations Fund (an investment portfolio of Money Market Obligations Trust, a
Massachusetts business trust), including the schedule of portfolio investments,
as of July 31, 1994, the related statement of operations for the year then
ended, and the statement of changes in net assets for each of the two years in
the period then ended, and the financial highlights for the periods presented.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1994, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Tax-Free Obligations Fund (an investment portfolio of Money Market Obligations
Trust) as of July 31, 1994, and the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
September 15, 1994
27
<TABLE>
<CAPTION>
TRUSTEES OFFICERS
- ---------------------------------------------------------
<S> <C>
John F. Donahue John F. Donahue
John T. Conroy, Jr. CHAIRMAN
William J. Copeland J. Christopher Donahue
J. Christopher Donahue PRESIDENT
James E. Dowd Richard B. Fisher
Lawrence D. Ellis, M.D. VICE PRESIDENT
Edward L. Flaherty, Jr. Edward C. Gonzales
Peter E. Madden VICE PRESIDENT AND TREASURER
Gregor F. Meyer John W. McGonigle
Wesley W. Posvar VICE PRESIDENT AND SECRETARY
Marjorie P. Smuts David M. Taylor
ASSISTANT TREASURER
Jeannette Fisher-Garber
ASSISTANT SECRETARY
</TABLE>
Mutual funds are not bank deposits or obligations, are not
guaranteed by any bank, and are not insured or guaranteed by the
FDIC, the Federal Reserve Board, or any other government agency.
Although money market funds seek to maintain a stable net asset
value of $1.00 per share, there is no assurance that they will be
able to do so.
This report is authorized for distribution to prospective
investors only when preceded or accompanied by the Fund's
prospectus which contains facts concerning its objectives and
policies, management fees, expenses and other information.
----------------------------------------
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TAX-FREE
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--------------------
OBLIGATIONS
- -------------------------
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FUND
- -------------------------
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- -------------------------
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ANNUAL REPORT
TO SHAREHOLDERS
JULY 31, 1994
[LOGO] ----------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
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FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
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[LOGO]
RECYCLED
PAPER
60934N401
60934N880
G00645-03 (9/94)
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